By buying an index fund, you can roughly match the market return with ease. But if you choose individual stocks with prowess, you can make superior returns. For example, the Guangzhou Lingnan Group Holdings Company Limited (SZSE:000524) share price is up 28% in the last three years, clearly besting the market decline of around 30% (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.

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

Guangzhou Lingnan Group Holdings became profitable within the last three years. That would generally be considered a positive, so we'd expect the share price to be up.

The company's earnings per share (over time) is depicted in the image below (click to see the exact numbers).

We know that Guangzhou Lingnan Group Holdings has improved its bottom line over the last three years, but what does the future have in store? This free interactive report on Guangzhou Lingnan Group Holdings' balance sheet strength is a great place to start, if you want to investigate the stock further.

A Different Perspective

The total return of 15% received by Guangzhou Lingnan Group Holdings shareholders over the last year isn't far from the market return of -15%. Longer term investors wouldn't be so upset, since they would have made 3%, each year, over five years. If the stock price has been impacted by changing sentiment, rather than deteriorating business conditions, it could spell opportunity. Is Guangzhou Lingnan Group Holdings cheap compared to other companies? These 3 valuation measures might help you decide.

If you are like me, then you will not want to miss this free list of undervalued small caps that insiders are buying.

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.

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