When we invest, we're generally looking for stocks that outperform the market average. Buying under-rated businesses is one path to excess returns. For example, the CETC Digital Technology Co.,Ltd. (SHSE:600850) share price is up 41% in the last 5 years, clearly besting the market return of around 26% (ignoring dividends). However, more recent returns haven't been as impressive as that, with the stock returning just 11% in the last year, 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.

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.

Over half a decade, CETC Digital TechnologyLtd managed to grow its earnings per share at 6.4% a year. So the EPS growth rate is rather close to the annualized share price gain of 7% per year. That suggests that the market sentiment around the company hasn't changed much over that time. In fact, the share price seems to largely reflect the EPS growth.

The company's earnings per share (over time) is depicted in the image below (click to see the exact numbers).

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

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. We note that for CETC Digital TechnologyLtd the TSR over the last 5 years was 51%, which is better than the share price return mentioned above. This is largely a result of its dividend payments!

A Different Perspective

CETC Digital TechnologyLtd provided a TSR of 11% over the year (including dividends). That's fairly close to the broader market return. That gain looks pretty satisfying, and it is even better than the five-year TSR of 9% per year. Even if the share price growth slows down from here, there's a good chance that this is business worth watching in the long term. 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. Even so, be aware that CETC Digital TechnologyLtd is showing 1 warning sign in our investment analysis , you should know about...

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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.