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. Just take a look at Hunan Haili Chemical Industry Co., Ltd. (SHSE:600731), which is up 56%, over three years, soundly beating the market return of 29% (not including dividends). However, more recent returns haven't been as impressive as that, with the stock returning just 6.7% in the last year.

The past week has proven to be lucrative for Hunan Haili Chemical Industry investors, so let's see if fundamentals drove the company's three-year performance.

See our latest analysis for Hunan Haili Chemical Industry

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 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.

Hunan Haili Chemical Industry was able to grow its EPS at 26% per year over three years, sending the share price higher. This EPS growth is higher than the 16% average annual increase in the share price. Therefore, it seems the market has moderated its expectations for growth, somewhat.

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 Hunan Haili Chemical Industry's earnings, revenue and cash flow is a great place to start, if you want to investigate the stock further.

A Different Perspective

It's good to see that Hunan Haili Chemical Industry has rewarded shareholders with a total shareholder return of 6.7% in the last twelve months. And that does include the dividend. Since the one-year TSR is better than the five-year TSR (the latter coming in at 6% 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. 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. Consider risks, for instance. Every company has them, and we've spotted 1 warning sign for Hunan Haili Chemical Industry you should know about.

We will like Hunan Haili Chemical Industry better if we see some big insider buys. While we wait, check out this free list of growing companies 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 CN 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.