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, Shenzhen Liande Automation Equipment co.,ltd. (SZSE:300545) shareholders have seen the share price rise 49% over three years, well in excess of the market decline (19%, not including dividends). On the other hand, the returns haven't been quite so good recently, with shareholders up just 15%, 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.

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 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 Liande Automation Equipmentltd was able to grow its EPS at 54% per year over three years, sending the share price higher. The average annual share price increase of 14% is actually lower than the EPS growth. So one could reasonably conclude that the market has cooled on the stock.

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

It might be well worthwhile taking a look at our free report on Shenzhen Liande Automation Equipmentltd's earnings, revenue and cash flow.

A Different Perspective

We're pleased to report that Shenzhen Liande Automation Equipmentltd shareholders have received a total shareholder return of 15% over one year. And that does include the dividend. That's better than the annualised return of 6% over half a decade, implying that the company is doing better recently. 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. Consider for instance, the ever-present spectre of investment risk. We've identified 1 warning sign with Shenzhen Liande Automation Equipmentltd , and understanding them should be part of your investment process.

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.