One simple way to benefit from the stock market is to buy an index fund. But if you buy good businesses at attractive prices, your portfolio returns could exceed the average market return. Just take a look at Shenzhen Easttop Supply Chain Management Co., Ltd. (SZSE:002889), which is up 77%, over three years, soundly beating the market decline of 17% (not including dividends).

Since it's been a strong week for Shenzhen Easttop Supply Chain Management shareholders, let's have a look at trend of the longer term fundamentals.

While the efficient markets hypothesis continues to be taught by some, it has been proven that markets are over-reactive dynamic systems, and investors are not always rational. 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.

Over the last three years, Shenzhen Easttop Supply Chain Management failed to grow earnings per share, which fell 7.3% (annualized).

This means it's unlikely the market is judging the company based on earnings growth. Given this situation, it makes sense to look at other metrics too.

The modest 0.3% dividend yield is unlikely to be propping up the share price. You can only imagine how long term shareholders feel about the declining revenue trend (slipping at 0.05% per year). What's clear is that historic earnings and revenue aren't matching up with the share price action, very well. So you might have to dig deeper to get a grasp of the situation

The company's revenue and earnings (over time) are depicted in the image below (click to see the exact numbers).

Balance sheet strength is crucial. It might be well worthwhile taking a look at our free report on how its financial position has changed over time.

What About Dividends?

It is important to consider the total shareholder return, as well as the share price return, for any given stock. The TSR incorporates the value of any spin-offs or discounted capital raisings, along with any dividends, based on the assumption that the dividends are reinvested. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. As it happens, Shenzhen Easttop Supply Chain Management's TSR for the last 3 years was 80%, which exceeds the share price return mentioned earlier. This is largely a result of its dividend payments!

A Different Perspective

Shenzhen Easttop Supply Chain Management shareholders are down 20% for the year (even including dividends), but the market itself is up 5.1%. Even the share prices of good stocks drop sometimes, but we want to see improvements in the fundamental metrics of a business, before getting too interested. Longer term investors wouldn't be so upset, since they would have made 11%, each year, over five years. It could be that the recent sell-off is an opportunity, so it may be worth checking the fundamental data for signs of a long term growth trend. It's always interesting to track share price performance over the longer term. But to understand Shenzhen Easttop Supply Chain Management better, we need to consider many other factors. Consider risks, for instance. Every company has them, and we've spotted 2 warning signs for Shenzhen Easttop Supply Chain Management you should know about.

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.