By buying an index fund, investors can approximate the average market return. But if you buy good businesses at attractive prices, your portfolio returns could exceed the average market return. For example, Shenzhen Genvict Technologies Co., Ltd. (SZSE:002869) shareholders have seen the share price rise 86% 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 42%, including dividends.

In light of the stock dropping 8.0% in the past week, we want to investigate the longer term story, and see if fundamentals have been the driver of the company's positive three-year return.

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

Shenzhen Genvict Technologies was able to grow its EPS at 14% per year over three years, sending the share price higher. This EPS growth is lower than the 23% average annual increase in the share price. This indicates that the market is feeling more optimistic on the stock, after the last few years of progress. It's not unusual to see the market 're-rate' a stock, after a few years of growth. This favorable sentiment is reflected in its (fairly optimistic) P/E ratio of 94.04.

The image below shows how EPS has tracked over time (if you click on the image you can see greater detail).

We know that Shenzhen Genvict Technologies has improved its bottom line lately, but is it going to grow revenue? This free report showing analyst revenue forecasts should help you figure out if the EPS growth can be sustained.

A Different Perspective

It's good to see that Shenzhen Genvict Technologies has rewarded shareholders with a total shareholder return of 42% in the last twelve months. Of course, that includes the dividend. That certainly beats the loss of about 5% per year over the last half decade. This makes us a little wary, but the business might have turned around its fortunes. 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 be aware of the 1 warning sign we've spotted with Shenzhen Genvict Technologies .

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.