By buying an index fund, you can roughly match the market return with ease. But if you buy good businesses at attractive prices, your portfolio returns could exceed the average market return. For example, the Yuancheng Environment Co., Ltd. (SHSE:603388) share price is up 53% in the last three years, clearly besting the market decline of around 15% (not including dividends).

On the back of a solid 7-day performance, let's check what role the company's fundamentals have played in driving long term shareholder returns.

View our latest analysis for Yuancheng Environment

There is no denying that markets are sometimes efficient, but prices do not always reflect underlying business performance. One way to examine how market sentiment has changed over time is to look at the interaction between a company's share price and its earnings per share (EPS).

Over the last three years, Yuancheng Environment failed to grow earnings per share, which fell 97% (annualized).

This means it's unlikely the market is judging the company based on earnings growth. Since the change in EPS doesn't seem to correlate with the change in share price, it's worth taking a look at other metrics.

You can only imagine how long term shareholders feel about the declining revenue trend (slipping at 31% 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 image below shows how earnings and revenue have tracked over time (if you click on the image you can see greater detail).

Take a more thorough look at Yuancheng Environment's financial health with this free report on its balance sheet.

A Different Perspective

While the broader market lost about 4.5% in the twelve months, Yuancheng Environment shareholders did even worse, losing 15%. However, it could simply be that the share price has been impacted by broader market jitters. It might be worth keeping an eye on the fundamentals, in case there's a good opportunity. Longer term investors wouldn't be so upset, since they would have made 9%, each year, over five years. If the fundamental data continues to indicate long term sustainable growth, the current sell-off could be an opportunity worth considering. 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. Case in point: We've spotted 2 warning signs for Yuancheng Environment you should be aware of.

We will like Yuancheng Environment 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 Chinese exchanges.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.
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.