Stock pickers are generally looking for stocks that will outperform the broader market. And the truth is, you can make significant gains if you buy good quality businesses at the right price. For example, the Silkroad Visual Technology Co., Ltd. (SZSE:300556) share price is up 54% 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 1.9% in the last year, including dividends.

Since it's been a strong week for Silkroad Visual Technology 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 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.

During five years of share price growth, Silkroad Visual Technology actually saw its EPS drop 39% per year.

Essentially, it doesn't seem likely that investors are focused on EPS. Since the change in EPS doesn't seem to correlate with the change in share price, it's worth taking a look at other metrics.

The modest 0.1% dividend yield is unlikely to be propping up the share price. On the other hand, Silkroad Visual Technology's revenue is growing nicely, at a compound rate of 6.9% over the last five years. It's quite possible that management are prioritizing revenue growth over EPS growth at the moment.

You can see how earnings and revenue have changed over time in the image below (click on the chart to see the exact values).

You can see how its balance sheet has strengthened (or weakened) over time in this free interactive graphic.

What About Dividends?

When looking at investment returns, it is important to consider the difference between total shareholder return (TSR) and share price return. 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. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. In the case of Silkroad Visual Technology, it has a TSR of 57% 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

Silkroad Visual Technology shareholders gained a total return of 1.9% during the year. But that was short of the market average. If we look back over five years, the returns are even better, coming in at 9% per year for five years. Maybe the share price is just taking a breather while the business executes on its growth strategy. It's always interesting to track share price performance over the longer term. But to understand Silkroad Visual Technology better, we need to consider many other factors. Like risks, for instance. Every company has them, and we've spotted 2 warning signs for Silkroad Visual Technology (of which 1 makes us a bit uncomfortable!) you should know about.

If you would prefer to check out another company -- one with potentially superior financials -- then do not miss this free list of companies that have proven they can 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.