Generally speaking the aim of active stock picking is to find companies that provide returns that are superior to the market average. Buying under-rated businesses is one path to excess returns. For example, the Kingclean Electric Co.,Ltd (SHSE:603355) share price is up 54% in the last 5 years, clearly besting the market return of around 16% (ignoring dividends). However, more recent returns haven't been as impressive as that, with the stock returning just 10% in the last year.

After a strong gain in the past week, it's worth seeing if longer term returns have been driven by improving fundamentals.

To quote Buffett, 'Ships will sail around the world but the Flat Earth Society will flourish. There will continue to be wide discrepancies between price and value in the marketplace...' By comparing earnings per share (EPS) and share price changes over time, we can get a feel for how investor attitudes to a company have morphed over time.

Over half a decade, Kingclean ElectricLtd managed to grow its earnings per share at 20% a year. The EPS growth is more impressive than the yearly share price gain of 9% over the same period. So it seems the market isn't so enthusiastic about the stock these days.

You can see below how EPS has changed over time (discover the exact values by clicking on the image).

It is of course excellent to see how Kingclean ElectricLtd has grown profits over the years, but the future is more important for shareholders. You can see how its balance sheet has strengthened (or weakened) over time in this free interactive graphic.

What About The Total Shareholder Return (TSR)?

We've already covered Kingclean ElectricLtd's share price action, but we should also mention its total shareholder return (TSR). Arguably the TSR is a more complete return calculation because it accounts for the value of dividends (as if they were reinvested), along with the hypothetical value of any discounted capital that have been offered to shareholders. Its history of dividend payouts mean that Kingclean ElectricLtd's TSR of 74% over the last 5 years is better than the share price return.

A Different Perspective

It's nice to see that Kingclean ElectricLtd shareholders have received a total shareholder return of 10% over the last year. Having said that, the five-year TSR of 12% a year, is even better. Before forming an opinion on Kingclean ElectricLtd you might want to consider these 3 valuation metrics.

If you like to buy stocks alongside management, then you might just love this free list of companies. (Hint: many of them are unnoticed AND have attractive valuation).

Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on Chinese exchanges.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.