Guizhou Guihang Automotive ComponentsLtd's (SHSE:600523) 39% return outpaced the company's earnings growth over the same one-year period

Passive investing in index funds can generate returns that roughly match the overall market. But you can significantly boost your returns by picking above-average stocks. To wit, the Guizhou Guihang Automotive Components Co.,Ltd (SHSE:600523) share price is 37% higher than it was a year ago, much better than the market return of around 20% (not including dividends) in the same period. So that should have shareholders smiling. In contrast, the longer term returns are negative, since the share price is 37% lower than it was three years ago.

Since the stock has added CN¥546m to its market cap in the past week alone, let's see if underlying performance has been driving long-term returns.

Check out our latest analysis for Guizhou Guihang Automotive ComponentsLtd

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.

Guizhou Guihang Automotive ComponentsLtd was able to grow EPS by 20% in the last twelve months. This EPS growth is significantly lower than the 37% increase in the share price. So it's fair to assume the market has a higher opinion of the business than it a year ago.

You can see below how EPS has changed over time (discover the exact values by clicking on the image).

Dive deeper into Guizhou Guihang Automotive ComponentsLtd's key metrics by checking this interactive graph of Guizhou Guihang Automotive ComponentsLtd's earnings, revenue and cash flow.

A Different Perspective

It's nice to see that Guizhou Guihang Automotive ComponentsLtd shareholders have received a total shareholder return of 39% over the last year. Of course, that includes the dividend. That's better than the annualised return of 1.3% 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. While it is well worth considering the different impacts that market conditions can have on the share price, there are other factors that are even more important. Even so, be aware that Guizhou Guihang Automotive ComponentsLtd is showing 2 warning signs in our investment analysis , 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.