When we invest, we're generally looking for stocks that outperform the market average. And while active stock picking involves risks (and requires diversification) it can also provide excess returns. For example, long term Inspur Electronic Information Industry Co., Ltd. (SZSE:000977) shareholders have enjoyed a 33% share price rise over the last half decade, well in excess of the market return of around 2.8% (not including dividends).

Since it's been a strong week for Inspur Electronic Information Industry shareholders, let's have a look at trend of the longer term fundamentals.

To paraphrase Benjamin Graham: Over the short term the market is a voting machine, but over the long term it's a weighing machine. One imperfect but simple way to consider how the market perception of a company has shifted is to compare the change in the earnings per share (EPS) with the share price movement.

Over half a decade, Inspur Electronic Information Industry managed to grow its earnings per share at 20% a year. The EPS growth is more impressive than the yearly share price gain of 6% over the same period. So it seems the market isn't so enthusiastic about the stock these days.

The image below shows how EPS has tracked over time (if you click on the image you can see greater detail).

We know that Inspur Electronic Information Industry has improved its bottom line lately, but is it going to grow revenue? You could check out this free report showing analyst revenue forecasts.

What About Dividends?

When looking at investment returns, it is important to consider the difference between total shareholder return (TSR) and share price return. The TSR is a return calculation that accounts for the value of cash dividends (assuming that any dividend received was reinvested) and the calculated value of any discounted capital raisings and spin-offs. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. We note that for Inspur Electronic Information Industry the TSR over the last 5 years was 47%, which is better than the share price return mentioned above. This is largely a result of its dividend payments!

A Different Perspective

Although it hurts that Inspur Electronic Information Industry returned a loss of 8.5% in the last twelve months, the broader market was actually worse, returning a loss of 10%. Of course, the long term returns are far more important and the good news is that over five years, the stock has returned 8% for each year. It could be that the business is just facing some short term problems, but shareholders should keep a close eye on the fundamentals. Is Inspur Electronic Information Industry cheap compared to other companies? These 3 valuation measures might help you decide.

If you like to buy stocks alongside management, then you might just love this free list of companies. (Hint: many of them are unnoticed AND have attractive valuation).

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.