When we invest, we're generally looking for stocks that outperform the market average. And the truth is, you can make significant gains if you buy good quality businesses at the right price. To wit, the Stanley Agriculture GroupLtd share price has climbed 74% in five years, easily topping the market decline of 2.6% (ignoring dividends). On the other hand, the more recent gains haven't been so impressive, with shareholders gaining just 26%, including dividends.

The past week has proven to be lucrative for Stanley Agriculture GroupLtd investors, so let's see if fundamentals drove the company's five-year performance.

To quote Buffett, 'Ships will sail around the world but the Flat Earth Society will flourish. There will continue to be wide discrepancies between price and value in the marketplace...' 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 half a decade, Stanley Agriculture GroupLtd managed to grow its earnings per share at 36% a year. This EPS growth is higher than the 12% average annual increase in the share price. So it seems the market isn't so enthusiastic about the stock these days. This cautious sentiment is reflected in its (fairly low) P/E ratio of 11.14.

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

We know that Stanley Agriculture GroupLtd 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.

What About Dividends?

As well as measuring the share price return, investors should also consider the total shareholder return (TSR). The TSR incorporates the value of any spin-offs or discounted capital raisings, along with any dividends, based on the assumption that the dividends are reinvested. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. As it happens, Stanley Agriculture GroupLtd's TSR for the last 5 years was 83%, which exceeds the share price return mentioned earlier. And there's no prize for guessing that the dividend payments largely explain the divergence!

A Different Perspective

It's nice to see that Stanley Agriculture GroupLtd shareholders have received a total shareholder return of 26% over the last year. Of course, that includes the dividend. That's better than the annualised return of 13% over half a decade, implying that the company is doing better recently. Given the share price momentum remains strong, it might be worth taking a closer look at the stock, lest you miss an opportunity. 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. Take risks, for example - Stanley Agriculture GroupLtd has 2 warning signs (and 1 which doesn't sit too well with us) we think you should know about.

We will like Stanley Agriculture GroupLtd better if we see some big insider buys. While we wait, check out this free list of undervalued stocks (mostly small caps) 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.

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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.