Passive investing in index funds can generate returns that roughly match the overall market. But if you pick the right individual stocks, you could make more than that. To wit, the Agricultural Bank of China Limited (HKG:1288) share price is 40% higher than it was a year ago, much better than the market return of around 0.7% (not including dividends) in the same period. If it can keep that out-performance up over the long term, investors will do very well! And shareholders have also done well over the long term, with an increase of 38% in the last three years.

The past week has proven to be lucrative for Agricultural Bank of China investors, so let's see if fundamentals drove the company's one-year performance.

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 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 the last year Agricultural Bank of China grew its earnings per share (EPS) by 3.2%. The share price gain of 40% certainly outpaced the EPS growth. This indicates that the market is now more optimistic about the stock.

You can see below how EPS has changed over time (discover the exact values by clicking on the image).

Before buying or selling a stock, we always recommend a close examination of historic growth trends, available here.

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. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. As it happens, Agricultural Bank of China's TSR for the last 1 year was 50%, 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 good to see that Agricultural Bank of China has rewarded shareholders with a total shareholder return of 50% in the last twelve months. And that does include the dividend. That gain is better than the annual TSR over five years, which is 12%. Therefore it seems like sentiment around the company has been positive lately. In the best case scenario, this may hint at some real business momentum, implying that now could be a great time to delve deeper. Keeping this in mind, a solid next step might be to take a look at Agricultural Bank of China's dividend track record. This free interactive graph is a great place to start.

We will like Agricultural Bank of China better if we see some big insider buys. While we wait, check out this free list of undervalued stocks (mostly small caps) with considerable, recent, insider buying.

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