The 10% return this week takes NanJing AoLian AE&EALtd's (SZSE:300585) shareholders one-year gains to 63%

If you want to compound wealth in the stock market, you can do so by buying an index fund. But you can significantly boost your returns by picking above-average stocks. For example, the NanJing AoLian AE&EA Co.,Ltd (SZSE:300585) share price is up 63% in the last 1 year, clearly besting the market return of around 17% (not including dividends). So that should have shareholders smiling. The longer term returns have not been as good, with the stock price only 15% higher than it was three years ago.

Since the stock has added CN¥289m 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 NanJing AoLian AE&EALtd

To quote Buffett, 'Ships will sail around the world but the Flat Earth Society will flourish. There will continue to be wide discrepancies between price and value in the marketplace...' 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 the last twelve months NanJing AoLian AE&EALtd went from profitable to unprofitable. While this may prove temporary, we'd consider it a negative, so we would not have expected to see the share price up. We might get a clue to explain the share price move by looking to other metrics.

We doubt the modest 0.05% dividend yield is doing much to support the share price. Unfortunately NanJing AoLian AE&EALtd's fell 4.1% over twelve months. So the fundamental metrics don't provide an obvious explanation for the share price gain.

You can see below how earnings and revenue have changed over time (discover the exact values by clicking on the image).

You can see how its balance sheet has strengthened (or weakened) over time in this free interactive graphic.

A Different Perspective

We're pleased to report that NanJing AoLian AE&EALtd shareholders have received a total shareholder return of 63% over one year. Of course, that includes the dividend. That gain is better than the annual TSR over five years, which is 5%. Therefore it seems like sentiment around the company has been positive lately. Given the share price momentum remains strong, it might be worth taking a closer look at the stock, lest you miss an opportunity. It's always interesting to track share price performance over the longer term. But to understand NanJing AoLian AE&EALtd better, we need to consider many other factors. Take risks, for example - NanJing AoLian AE&EALtd has 1 warning sign we think you should be aware of.

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.