By buying an index fund, investors can approximate the average market return. But if you pick the right individual stocks, you could make more than that. For example, Yuan Cheng Cable Co.,Ltd. (SZSE:002692) shareholders have seen the share price rise 77% over three years, well in excess of the market decline (22%, not including dividends). On the other hand, the returns haven't been quite so good recently, with shareholders up just 28%.

On the back of a solid 7-day performance, let's check what role the company's fundamentals have played in driving long term shareholder returns.

View our latest analysis for Yuan Cheng CableLtd

While markets are a powerful pricing mechanism, share prices reflect investor sentiment, not just underlying business performance. 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.

During the three years of share price growth, Yuan Cheng CableLtd actually saw its earnings per share (EPS) drop 11% per year.

So we doubt that the market is looking to EPS for its main judge of the company's value. 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.

It may well be that Yuan Cheng CableLtd revenue growth rate of 5.1% over three years has convinced shareholders to believe in a brighter future. In that case, the company may be sacrificing current earnings per share to drive growth, and maybe shareholder's faith in better days ahead will be rewarded.

The company's revenue and earnings (over time) are depicted in the image below (click to see the exact numbers).

This free interactive report on Yuan Cheng CableLtd's balance sheet strength is a great place to start, if you want to investigate the stock further.

A Different Perspective

We're pleased to report that Yuan Cheng CableLtd shareholders have received a total shareholder return of 28% over one year. Since the one-year TSR is better than the five-year TSR (the latter coming in at 1.4% per year), it would seem that the stock's performance has improved in recent times. Someone with an optimistic perspective could view the recent improvement in TSR as indicating that the business itself is getting better with time. It's always interesting to track share price performance over the longer term. But to understand Yuan Cheng CableLtd better, we need to consider many other factors. Like risks, for instance. Every company has them, and we've spotted 3 warning signs for Yuan Cheng CableLtd (of which 2 make us uncomfortable!) you should know about.

If you are like me, then you will not want to miss this free list of growing companies 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.