By buying an index fund, investors can approximate the average market return. But many of us dare to dream of bigger returns, and build a portfolio ourselves. Just take a look at Guizhou Taiyong-Changzheng Technology Co.,Ltd. (SZSE:002927), which is up 41%, over three years, soundly beating the market decline of 23% (not including dividends). On the other hand, the returns haven't been quite so good recently, with shareholders up just 12%, including dividends.

After a strong gain in the past week, it's worth seeing if longer term returns have been driven by improving fundamentals.

There is no denying that markets are sometimes efficient, but prices do not always reflect underlying business performance. 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 the last three years, Guizhou Taiyong-Changzheng TechnologyLtd failed to grow earnings per share, which fell 25% (annualized).

This means it's unlikely the market is judging the company based on earnings growth. Given this situation, it makes sense to look at other metrics too.

The modest 0.6% dividend yield is unlikely to be propping up the share price. We severely doubt anyone is particularly impressed with the modest 1.4% three-year revenue growth rate. While we don't have an obvious theory to explain the share price rise, a closer look at the data might be enlightening.

The company's revenue and earnings (over time) are depicted in the image below (click to see the exact numbers).

Take a more thorough look at Guizhou Taiyong-Changzheng TechnologyLtd's financial health with this free report on its balance sheet.

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 is a return calculation that accounts for the value of cash dividends (assuming that any dividend received was reinvested) and the calculated value of any discounted capital raisings and spin-offs. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. As it happens, Guizhou Taiyong-Changzheng TechnologyLtd's TSR for the last 3 years was 46%, which exceeds the share price return mentioned earlier. And there's no prize for guessing that the dividend payments largely explain the divergence!

A Different Perspective

It's good to see that Guizhou Taiyong-Changzheng TechnologyLtd has rewarded shareholders with a total shareholder return of 12% in the last twelve months. Of course, that includes the dividend. That's better than the annualised return of 2% 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. Take risks, for example - Guizhou Taiyong-Changzheng TechnologyLtd has 2 warning signs (and 1 which is a bit unpleasant) we think you should know about.

If you are like me, then you will not want to miss this free list of undervalued small caps that insiders are buying.

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.