By buying an index fund, you can roughly match the market return with ease. But if you buy good businesses at attractive prices, your portfolio returns could exceed the average market return. For example, Jointo Energy Investment Co., Ltd. Hebei (SZSE:000600) shareholders have seen the share price rise 20% over three years, well in excess of the market decline (18%, not including dividends). On the other hand, the returns haven't been quite so good recently, with shareholders up just 8.1%, including dividends.

Since it's been a strong week for Jointo Energy Investment Hebei shareholders, let's have a look at trend of the longer term fundamentals.

While markets are a powerful pricing mechanism, share prices reflect investor sentiment, not just underlying business performance. One imperfect but simple way to consider how the market perception of a company has shifted is to compare the change in the earnings per share (EPS) with the share price movement.

During three years of share price growth, Jointo Energy Investment Hebei moved from a loss to profitability. So we would expect a higher share price over the period.

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

We know that Jointo Energy Investment Hebei has improved its bottom line over the last three years, but what does the future have in store? This free interactive report on Jointo Energy Investment Hebei's balance sheet strength is a great place to start, if you want to investigate the stock further.

What About Dividends?

When looking at investment returns, it is important to consider the difference between total shareholder return (TSR) and share price return. The TSR incorporates the value of any spin-offs or discounted capital raisings, along with any dividends, based on the assumption that the dividends are reinvested. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. In the case of Jointo Energy Investment Hebei, it has a TSR of 22% for the last 3 years. That exceeds its share price return that we previously mentioned. The dividends paid by the company have thusly boosted the total shareholder return.

A Different Perspective

Jointo Energy Investment Hebei shareholders gained a total return of 8.1% during the year. Unfortunately this falls short of the market return. On the bright side, that's still a gain, and it's actually better than the average return of 4% over half a decade It is possible that returns will improve along with the business fundamentals. It's always interesting to track share price performance over the longer term. But to understand Jointo Energy Investment Hebei better, we need to consider many other factors. Like risks, for instance. Every company has them, and we've spotted 3 warning signs for Jointo Energy Investment Hebei (of which 1 shouldn't be ignored!) you should know about.

If you are like me, then you will not want to miss this free list of undervalued small caps that insiders are buying.

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

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.
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.