If you want to compound wealth in the stock market, you can do so by buying an index fund. But you can significantly boost your returns by picking above-average stocks. For example, the Hangzhou DPtech Technologies Co.,Ltd. (SZSE:300768) share price is up 42% in the last 1 year, clearly besting the market return of around 9.0% (not including dividends). If it can keep that out-performance up over the long term, investors will do very well! Zooming out, the stock is actually down 29% in the last three years.

Since the stock has added CN¥778m to its market cap in the past week alone, let's see if underlying performance has been driving long-term returns.

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 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.

Hangzhou DPtech TechnologiesLtd was able to grow EPS by 3.2% in the last twelve months. The share price gain of 42% certainly outpaced the EPS growth. This indicates that the market is now more optimistic about the stock. This favorable sentiment is reflected in its (fairly optimistic) P/E ratio of 90.32.

The graphic below depicts how EPS has changed over time (unveil the exact values by clicking on the image).

It might be well worthwhile taking a look at our free report on Hangzhou DPtech TechnologiesLtd's earnings, revenue and cash flow.

A Different Perspective

It's good to see that Hangzhou DPtech TechnologiesLtd has rewarded shareholders with a total shareholder return of 43% in the last twelve months. And that does include the dividend. There's no doubt those recent returns are much better than the TSR loss of 1.2% per year over five years. We generally put more weight on the long term performance over the short term, but the recent improvement could hint at a (positive) inflection point within the business. 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 risks, for instance. Every company has them, and we've spotted 1 warning sign for Hangzhou DPtech TechnologiesLtd you should know about.

But note: Hangzhou DPtech TechnologiesLtd may not be the best stock to buy. So take a peek at this free list of interesting companies with past earnings growth (and further growth forecast).

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.