Passive investing in index funds can generate returns that roughly match the overall market. But you can significantly boost your returns by picking above-average stocks. To wit, the Shenzhen Silver Basis Technology Co., Ltd. (SZSE:002786) share price is 22% higher than it was a year ago, much better than the market decline of around 20% (not including dividends) in the same period. That's a solid performance by our standards! However, the longer term returns haven't been so impressive, with the stock up just 12% in the last three years.

The past week has proven to be lucrative for Shenzhen Silver Basis Technology investors, so let's see if fundamentals drove the company's one-year performance.

While the efficient markets hypothesis continues to be taught by some, it has been proven that markets are over-reactive dynamic systems, and investors are not always rational. 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.

Shenzhen Silver Basis Technology went from making a loss to reporting a profit, in the last year.

When a company is just on the edge of profitability it can be well worth considering other metrics in order to more precisely gauge growth (and therefore understand share price movements).

Shenzhen Silver Basis Technology's revenue actually dropped 5.7% over last year. So using a snapshot of key business metrics doesn't give us a good picture of why the market is bidding up the stock.

The graphic below depicts how earnings and revenue have changed over time (unveil the exact values by clicking on the image).

If you are thinking of buying or selling Shenzhen Silver Basis Technology stock, you should check out this FREE detailed report on its balance sheet.

A Different Perspective

It's good to see that Shenzhen Silver Basis Technology has rewarded shareholders with a total shareholder return of 22% in the last twelve months. Notably the five-year annualised TSR loss of 0.3% per year compares very unfavourably with the recent share price performance. We generally put more weight on the long term performance over the short term, but the recent improvement could hint at a (positive) inflection point within the business. It's always interesting to track share price performance over the longer term. But to understand Shenzhen Silver Basis Technology better, we need to consider many other factors. Even so, be aware that Shenzhen Silver Basis Technology is showing 3 warning signs in our investment analysis , and 2 of those don't sit too well with us...

But note: Shenzhen Silver Basis Technology may not be the best stock to buy. So take a peek at this free list of interesting companies with past earnings growth (and further growth forecast).

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.