When we invest, we're generally looking for stocks that outperform the market average. And while active stock picking involves risks (and requires diversification) it can also provide excess returns. For example, long term Wuxi Hodgen Technology Co., Ltd. (SZSE:300279) shareholders have enjoyed a 45% share price rise over the last half decade, well in excess of the market return of around 16% (not including dividends). On the other hand, the more recent gains haven't been so impressive, with shareholders gaining just 20%.

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

There is no denying that markets are sometimes efficient, but prices do not always reflect underlying business performance. 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.

During the five years of share price growth, Wuxi Hodgen Technology moved from a loss to profitability. That's generally thought to be a genuine positive, so investors may expect to see an increasing share price. Since the company was unprofitable five years ago, but not three years ago, it's worth taking a look at the returns in the last three years, too. Indeed, the Wuxi Hodgen Technology share price has gained 14% in three years. During the same period, EPS grew by 61% each year. This EPS growth is higher than the 4% average annual increase in the share price over the same three years. So you might conclude the market is a little more cautious about the stock, these days. Of course, with a P/E ratio of 67.66, the market remains optimistic.

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

Dive deeper into Wuxi Hodgen Technology's key metrics by checking this interactive graph of Wuxi Hodgen Technology's earnings, revenue and cash flow.

A Different Perspective

It's good to see that Wuxi Hodgen Technology has rewarded shareholders with a total shareholder return of 20% in the last twelve months. Since the one-year TSR is better than the five-year TSR (the latter coming in at 8% 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. 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. Consider for instance, the ever-present spectre of investment risk. We've identified 1 warning sign with Wuxi Hodgen Technology , and understanding them should be part of your investment process.

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.