Stock pickers are generally looking for stocks that will outperform the broader market. And in our experience, buying the right stocks can give your wealth a significant boost. For example, long term Shenzhen Agricultural Power Group Co.,Ltd (SZSE:000061) shareholders have enjoyed a 42% share price rise over the last half decade, well in excess of the market return of around 17% (not including dividends). On the other hand, the more recent gains haven't been so impressive, with shareholders gaining just 19%, including dividends.

Since the stock has added CN¥543m to its market cap in the past week alone, let's see if underlying performance has been driving long-term returns.

In his essay The Superinvestors of Graham-and-Doddsville Warren Buffett described how share prices do not always rationally reflect the value of a business. 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, Shenzhen Agricultural Power GroupLtd achieved compound earnings per share (EPS) growth of 24% per year. The EPS growth is more impressive than the yearly share price gain of 7% over the same period. Therefore, it seems the market has become relatively pessimistic about the company.

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

Before buying or selling a stock, we always recommend a close examination of historic growth trends, available here.

What About Dividends?

When looking at investment returns, it is important to consider the difference between total shareholder return (TSR) and share price return. 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. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. We note that for Shenzhen Agricultural Power GroupLtd the TSR over the last 5 years was 50%, which is better than the share price return mentioned above. This is largely a result of its dividend payments!

A Different Perspective

We're pleased to report that Shenzhen Agricultural Power GroupLtd shareholders have received a total shareholder return of 19% over one year. And that does include the dividend. That's better than the annualised return of 8% over half a decade, implying that the company is doing better recently. Someone with an optimistic perspective could view the recent improvement in TSR as indicating that the business itself is getting better with time. It's always interesting to track share price performance over the longer term. But to understand Shenzhen Agricultural Power GroupLtd better, we need to consider many other factors. Like risks, for instance. Every company has them, and we've spotted 2 warning signs for Shenzhen Agricultural Power GroupLtd (of which 1 doesn't sit too well with us!) you should know about.

For those who like to find winning investments this free list of undervalued companies with recent insider purchasing, could be just the ticket.

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.