Generally speaking the aim of active stock picking is to find companies that provide returns that are superior to the market average. And while active stock picking involves risks (and requires diversification) it can also provide excess returns. For example, the Ningxia Western Venture Industrial Co.,Ltd. (SZSE:000557) share price is up 48% in the last 5 years, clearly besting the market return of around 14% (ignoring dividends). On the other hand, the more recent gains haven't been so impressive, with shareholders gaining just 9.4%.

While this past week has detracted from the company's five-year return, let's look at the recent trends of the underlying business and see if the gains have been in alignment.

To paraphrase Benjamin Graham: Over the short term the market is a voting machine, but over the long term it's a weighing machine. One way to examine how market sentiment has changed over time is to look at the interaction between a company's share price and its earnings per share (EPS).

During five years of share price growth, Ningxia Western Venture IndustrialLtd achieved compound earnings per share (EPS) growth of 29% per year. This EPS growth is higher than the 8% average annual increase in the share price. Therefore, it seems the market has become relatively pessimistic about the company.

You can see how EPS has changed over time in the image below (click on the chart to see the exact values).

It's probably worth noting that the CEO is paid less than the median at similar sized companies. But while CEO remuneration is always worth checking, the really important question is whether the company can grow earnings going forward. It might be well worthwhile taking a look at our free report on Ningxia Western Venture IndustrialLtd's earnings, revenue and cash flow.

A Different Perspective

It's good to see that Ningxia Western Venture IndustrialLtd has rewarded shareholders with a total shareholder return of 9.4% in the last twelve months. That's better than the annualised return of 8% over half a decade, implying that the company is doing better recently. In the best case scenario, this may hint at some real business momentum, implying that now could be a great time to delve deeper. Before deciding if you like the current share price, check how Ningxia Western Venture IndustrialLtd scores on these 3 valuation metrics.

Of course Ningxia Western Venture IndustrialLtd may not be the best stock to buy. So you may wish to see this free collection of growth stocks.

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.