When we invest, we're generally looking for stocks that outperform the market average. And while active stock picking involves risks (and requires diversification) it can also provide excess returns. For example, long term Guangdong Sunwill Precising Plastic Co.,Ltd (SZSE:002676) shareholders have enjoyed a 93% share price rise over the last half decade, well in excess of the market return of around 15% (not including dividends). On the other hand, the more recent gains haven't been so impressive, with shareholders gaining just 30%, including dividends.

In light of the stock dropping 8.6% in the past week, we want to investigate the longer term story, and see if fundamentals have been the driver of the company's positive five-year return.

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 way to examine how market sentiment has changed over time is to look at the interaction between a company's share price and its earnings per share (EPS).

Over half a decade, Guangdong Sunwill Precising PlasticLtd managed to grow its earnings per share at 11% a year. This EPS growth is reasonably close to the 14% average annual increase in the share price. Therefore one could conclude that sentiment towards the shares hasn't morphed very much. Rather, the share price has approximately tracked EPS growth.

You can see how EPS has changed over time in the image below (click on the chart to see the exact values).

Dive deeper into Guangdong Sunwill Precising PlasticLtd's key metrics by checking this interactive graph of Guangdong Sunwill Precising PlasticLtd's earnings, revenue and cash flow.

A Different Perspective

It's good to see that Guangdong Sunwill Precising PlasticLtd has rewarded shareholders with a total shareholder return of 30% in the last twelve months. Of course, that includes the dividend. That's better than the annualised return of 14% over half a decade, implying that the company is doing better recently. Given the share price momentum remains strong, it might be worth taking a closer look at the stock, lest you miss an opportunity. I find it very interesting to look at share price over the long term as a proxy for business performance. But to truly gain insight, we need to consider other information, too. Consider risks, for instance. Every company has them, and we've spotted 1 warning sign for Guangdong Sunwill Precising PlasticLtd 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.