Stock pickers are generally looking for stocks that will outperform the broader market. And while active stock picking involves risks (and requires diversification) it can also provide excess returns. For example, the Guizhou Chanhen Chemical Corporation (SZSE:002895) share price is up 83% in the last 5 years, clearly besting the market return of around 16% (ignoring dividends). However, more recent returns haven't been as impressive as that, with the stock returning just 26% in the last year, including dividends.

Since it's been a strong week for Guizhou Chanhen Chemical 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, Guizhou Chanhen Chemical managed to grow its earnings per share at 43% a year. The EPS growth is more impressive than the yearly share price gain of 13% over the same period. Therefore, it seems the market has become relatively pessimistic about the company.

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

It's probably worth noting that the CEO is paid less than the median at similar sized companies. It's always worth keeping an eye on CEO pay, but a more important question is whether the company will grow earnings throughout the years. This free interactive report on Guizhou Chanhen Chemical's earnings, revenue and cash flow 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. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. In the case of Guizhou Chanhen Chemical, it has a TSR of 105% for the last 5 years. That exceeds its share price return that we previously mentioned. This is largely a result of its dividend payments!

A Different Perspective

It's nice to see that Guizhou Chanhen Chemical shareholders have received a total shareholder return of 26% over the last year. That's including the dividend. That gain is better than the annual TSR over five years, which is 15%. Therefore it seems like sentiment around the company has been positive lately. Given the share price momentum remains strong, it might be worth taking a closer look at the stock, lest you miss an opportunity. It's always interesting to track share price performance over the longer term. But to understand Guizhou Chanhen Chemical better, we need to consider many other factors. Consider risks, for instance. Every company has them, and we've spotted 2 warning signs for Guizhou Chanhen Chemical you should know about.

For those who like to find winning investments this free list of undervalued companies with recent insider purchasing, could be just the ticket.

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.