These days it's easy to simply buy an index fund, and your returns should (roughly) match the market. But investors can boost returns by picking market-beating companies to own shares in. To wit, the SDIC Capital Co.,Ltd (SHSE:600061) share price is 17% higher than it was a year ago, much better than the market return of around 12% (not including dividends) in the same period. If it can keep that out-performance up over the long term, investors will do very well! In contrast, the longer term returns are negative, since the share price is 3.9% lower than it was three years ago.

With that in mind, it's worth seeing if the company's underlying fundamentals have been the driver of long term performance, or if there are some discrepancies.

In his essay The Superinvestors of Graham-and-Doddsville Warren Buffett described how share prices do not always rationally reflect the value of a business. One flawed but reasonable way to assess how sentiment around a company has changed is to compare the earnings per share (EPS) with the share price.

Over the last twelve months, SDIC CapitalLtd actually shrank its EPS by 37%.

Given the share price gain, we doubt the market is measuring progress with EPS. Since the change in EPS doesn't seem to correlate with the change in share price, it's worth taking a look at other metrics.

We are skeptical of the suggestion that the 1.4% dividend yield would entice buyers to the stock. SDIC CapitalLtd's revenue actually dropped 18% over last year. So using a snapshot of key business metrics doesn't give us a good picture of why the market is bidding up the stock.

You can see below how earnings and revenue have changed over time (discover the exact values by clicking on the image).

This free interactive report on SDIC CapitalLtd'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. As it happens, SDIC CapitalLtd's TSR for the last 1 year was 19%, which exceeds the share price return mentioned earlier. This is largely a result of its dividend payments!

A Different Perspective

It's nice to see that SDIC CapitalLtd shareholders have received a total shareholder return of 19% over the last year. And that does include the dividend. Since the one-year TSR is better than the five-year TSR (the latter coming in at 0.6% per year), it would seem that the stock's performance has improved in recent times. Given the share price momentum remains strong, it might be worth taking a closer look at the stock, lest you miss an opportunity. It's always interesting to track share price performance over the longer term. But to understand SDIC CapitalLtd better, we need to consider many other factors. For instance, we've identified 2 warning signs for SDIC CapitalLtd that you should be aware of.

For those who like to find winning investments this free list of undervalued companies with recent insider purchasing, could be just the ticket.

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.