If you want to compound wealth in the stock market, you can do so by buying an index fund. But investors can boost returns by picking market-beating companies to own shares in. For example, the China Everbright Bank Company Limited (SHSE:601818) share price is up 26% in the last 1 year, clearly besting the market return of around 5.4% (not including dividends). That's a solid performance by our standards! The longer term returns have not been as good, with the stock price only 9.1% higher than it was three years ago.

Since the long term performance has been good but there's been a recent pullback of 3.6%, let's check if the fundamentals match the share price.

While the efficient markets hypothesis continues to be taught by some, it has been proven that markets are over-reactive dynamic systems, and investors are not always rational. 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).

Over the last twelve months, China Everbright Bank actually shrank its EPS by 15%.

Given the share price gain, we doubt the market is measuring progress with EPS. Therefore, it seems likely that investors are putting more weight on metrics other than EPS, at the moment.

Absent any improvement, we don't think a thirst for dividends is pushing up the China Everbright Bank's share price. Revenue actually dropped 6.6% over last year. Usually that correlates with a lower share price, but let's face it, the gyrations of the market are sometimes only as clear as mud.

The graphic below depicts how earnings and revenue have changed over time (unveil the exact values by clicking on the image).

China Everbright Bank is a well known stock, with plenty of analyst coverage, suggesting some visibility into future growth. If you are thinking of buying or selling China Everbright Bank stock, you should check out this free report showing analyst consensus estimates for future profits.

What About Dividends?

It is important to consider the total shareholder return, as well as the share price return, for any given stock. Whereas the share price return only reflects the change in the share price, the TSR includes the value of dividends (assuming they were reinvested) and the benefit of any discounted capital raising or spin-off. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. As it happens, China Everbright Bank's TSR for the last 1 year was 33%, which exceeds the share price return mentioned earlier. The dividends paid by the company have thusly boosted the total shareholder return.

A Different Perspective

It's nice to see that China Everbright Bank shareholders have received a total shareholder return of 33% 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 3% 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. While it is well worth considering the different impacts that market conditions can have on the share price, there are other factors that are even more important. For instance, we've identified 1 warning sign for China Everbright Bank that you should be aware of.

Of course, you might find a fantastic investment by looking elsewhere. So take a peek at this free list of companies we expect will grow earnings.

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.