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, Sichuan Expressway Company Limited (HKG:107) shareholders have seen the share price rise 88% over three years, well in excess of the market decline (4.9%, not including dividends). On the other hand, the returns haven't been quite so good recently, with shareholders up just 61%, including dividends.

Since it's been a strong week for Sichuan Expressway shareholders, let's have a look at trend of the longer term fundamentals.

In his essay The Superinvestors of Graham-and-Doddsville Warren Buffett described how share prices do not always rationally reflect the value of a business. 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 the last three years, Sichuan Expressway failed to grow earnings per share, which fell 10% (annualized).

Thus, it seems unlikely that the market is focussed on EPS growth at the moment. Given this situation, it makes sense to look at other metrics too.

Interestingly, the dividend has increased over time; so that may have given the share price a boost. Sometimes yield-chasing investors will flock to a company if they think the dividend can grow over time. On top of that, revenue grew at a rate of 13% per year, and it's likely investors interpret that as pointing to a brighter future.

You can see how earnings and revenue have changed over time in the image below (click on the chart to see the exact values).

This free interactive report on Sichuan Expressway's balance sheet strength is a great place to start, if you want to investigate the stock further.

What About Dividends?

It is important to consider the total shareholder return, as well as the share price return, for any given stock. Whereas the share price return only reflects the change in the share price, the TSR includes the value of dividends (assuming they were reinvested) and the benefit of any discounted capital raising or spin-off. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. We note that for Sichuan Expressway the TSR over the last 3 years was 128%, which is better than the share price return mentioned above. This is largely a result of its dividend payments!

A Different Perspective

It's nice to see that Sichuan Expressway shareholders have received a total shareholder return of 61% over the last year. That's including the dividend. Since the one-year TSR is better than the five-year TSR (the latter coming in at 15% per year), it would seem that the stock's performance has improved in recent times. Someone with an optimistic perspective could view the recent improvement in TSR as indicating that the business itself is getting better with time. 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. Even so, be aware that Sichuan Expressway is showing 2 warning signs in our investment analysis , and 1 of those makes us a bit uncomfortable...

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 Hong Kong 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.