One simple way to benefit from the stock market is to buy an index fund. But if you pick the right individual stocks, you could make more than that. For example, ChinaLin Securities Co., Ltd (SZSE:002945) shareholders have seen the share price rise 42% over three years, well in excess of the market decline (18%, not including dividends). On the other hand, the returns haven't been quite so good recently, with shareholders up just 7.1%, including dividends.

So let's assess the underlying fundamentals over the last 3 years and see if they've moved in lock-step with shareholder returns.

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. By comparing earnings per share (EPS) and share price changes over time, we can get a feel for how investor attitudes to a company have morphed over time.

Over the last three years, ChinaLin Securities failed to grow earnings per share, which fell 39% (annualized).

So we doubt that the market is looking to EPS for its main judge of the company's value. Therefore, we think it's worth considering other metrics as well.

Languishing at just 0.03%, we doubt the dividend is doing much to prop up the share price. You can only imagine how long term shareholders feel about the declining revenue trend (slipping at 7.9% per year). What's clear is that historic earnings and revenue aren't matching up with the share price action, very well. So you might have to dig deeper to get a grasp of the situation

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 ChinaLin Securities' balance sheet strength is a great place to start, if you want to investigate the stock further.

A Different Perspective

ChinaLin Securities shareholders gained a total return of 7.1% during the year. Unfortunately this falls short of the market return. The silver lining is that the gain was actually better than the average annual return of 4% per year over five year. This could indicate that the company is winning over new investors, as it pursues its strategy. I find it very interesting to look at share price over the long term as a proxy for business performance. But to truly gain insight, we need to consider other information, too. To that end, you should learn about the 3 warning signs we've spotted with ChinaLin Securities (including 1 which doesn't sit too well with us) .

If you would prefer to check out another company -- one with potentially superior financials -- then do not miss this free list of companies that have proven they can 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.