By buying an index fund, you can roughly match the market return with ease. But many of us dare to dream of bigger returns, and build a portfolio ourselves. For example, the Shanghai Dragon Corporation (SHSE:600630) share price is up 89% in the last three years, clearly besting the market decline of around 17% (not including dividends). However, more recent returns haven't been as impressive as that, with the stock returning just 22% in the last year, including dividends.

After a strong gain in the past week, it's worth seeing if longer term returns have been driven by improving 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 way to examine how market sentiment has changed over time is to look at the interaction between a company's share price and its earnings per share (EPS).

Shanghai Dragon became profitable within the last three years. So we would expect a higher share price over the period.

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

Dive deeper into Shanghai Dragon's key metrics by checking this interactive graph of Shanghai Dragon's earnings, revenue and cash flow.

A Different Perspective

We're pleased to report that Shanghai Dragon shareholders have received a total shareholder return of 22% over one year. And that does include the dividend. Since the one-year TSR is better than the five-year TSR (the latter coming in at 4% per year), it would seem that the stock's performance has improved in recent times. Given the share price momentum remains strong, it might be worth taking a closer look at the stock, lest you miss an opportunity. I find it very interesting to look at share price over the long term as a proxy for business performance. But to truly gain insight, we need to consider other information, too. For instance, we've identified 1 warning sign for Shanghai Dragon that you should be aware of.

Of course, you might find a fantastic investment by looking elsewhere. So take a peek at this free list of companies we expect will grow earnings.

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.