Stock pickers are generally looking for stocks that will outperform the broader market. And while active stock picking involves risks (and requires diversification) it can also provide excess returns. For example, the Ruitai Materials Technology Co., Ltd. (SZSE:002066) share price is up 55% in the last 5 years, clearly besting the market return of around 15% (ignoring dividends). However, more recent returns haven't been as impressive as that, with the stock returning just 9.4% in the last year, including dividends.

Since it's been a strong week for Ruitai Materials Technology shareholders, let's have a look at trend of the longer term fundamentals.

To paraphrase Benjamin Graham: Over the short term the market is a voting machine, but over the long term it's a weighing machine. 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 half a decade, Ruitai Materials Technology managed to grow its earnings per share at 27% a year. This EPS growth is higher than the 9% average annual increase in the share price. So one could conclude that the broader market has become more cautious towards the stock.

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

This free interactive report on Ruitai Materials Technology's earnings, revenue and cash flow is a great place to start, if you want to investigate the stock further.

What About Dividends?

As well as measuring the share price return, investors should also consider the total shareholder return (TSR). The TSR is a return calculation that accounts for the value of cash dividends (assuming that any dividend received was reinvested) and the calculated value of any discounted capital raisings and spin-offs. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. As it happens, Ruitai Materials Technology's TSR for the last 5 years was 58%, which exceeds the share price return mentioned earlier. And there's no prize for guessing that the dividend payments largely explain the divergence!

A Different Perspective

It's good to see that Ruitai Materials Technology has rewarded shareholders with a total shareholder return of 9.4% in the last twelve months. And that does include the dividend. However, that falls short of the 10% TSR per annum it has made for shareholders, each year, over five years. 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. Take risks, for example - Ruitai Materials Technology has 3 warning signs (and 1 which can't be ignored) we think you should know about.

Of course Ruitai Materials Technology may not be the best stock to buy. So you may wish to see this free collection of growth stocks.

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.