Stock pickers are generally looking for stocks that will outperform the broader market. And while active stock picking involves risks (and requires diversification) it can also provide excess returns. To wit, the Hanwei Electronics Group share price has climbed 38% in five years, easily topping the market return of 12% (ignoring dividends). On the other hand, the more recent gains haven't been so impressive, with shareholders gaining just 13%, including dividends.

The past week has proven to be lucrative for Hanwei Electronics Group investors, so let's see if fundamentals drove the company's five-year performance.

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. By comparing earnings per share (EPS) and share price changes over time, we can get a feel for how investor attitudes to a company have morphed over time.

Hanwei Electronics Group's earnings per share are down 1.4% per year, despite strong share price performance over five years.

So it's hard to argue that the earnings per share are the best metric to judge the company, as it may not be optimized for profits at this point. Therefore, it's worth taking a look at other metrics to try to understand the share price movements.

We doubt the modest 0.3% dividend yield is attracting many buyers to the stock. On the other hand, Hanwei Electronics Group's revenue is growing nicely, at a compound rate of 5.7% over the last five years. In that case, the company may be sacrificing current earnings per share to drive growth.

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

If you are thinking of buying or selling Hanwei Electronics Group stock, you should check out this FREE detailed report on its balance sheet.

What About Dividends?

As well as measuring the share price return, investors should also consider the total shareholder return (TSR). 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. In the case of Hanwei Electronics Group, it has a TSR of 42% 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

We're pleased to report that Hanwei Electronics Group shareholders have received a total shareholder return of 13% over one year. And that does include the dividend. That's better than the annualised return of 7% 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 Hanwei Electronics Group better, we need to consider many other factors. For instance, we've identified 3 warning signs for Hanwei Electronics Group that you should be aware of.

Of course Hanwei Electronics Group may not be the best stock to buy. So you may wish to see this free collection of growth stocks.

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.