Nanjing Kangni Mechanical & ElectricalLtd's (SHSE:603111) 59% YoY earnings expansion surpassed the shareholder returns over the past year

If you want to compound wealth in the stock market, you can do so by buying an index fund. But if you pick the right individual stocks, you could make more than that. To wit, the Nanjing Kangni Mechanical & Electrical Co.,Ltd (SHSE:603111) share price is 21% higher than it was a year ago, much better than the market decline of around 7.9% (not including dividends) in the same period. So that should have shareholders smiling. Having said that, the longer term returns aren't so impressive, with stock gaining just 4.4% in three years.

The past week has proven to be lucrative for Nanjing Kangni Mechanical & ElectricalLtd investors, so let's see if fundamentals drove the company's one-year performance.

See our latest analysis for Nanjing Kangni Mechanical & ElectricalLtd

There is no denying that markets are sometimes efficient, but prices do not always reflect underlying business performance. 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.

Nanjing Kangni Mechanical & ElectricalLtd was able to grow EPS by 59% in the last twelve months. This EPS growth is significantly higher than the 21% increase in the share price. Therefore, it seems the market isn't as excited about Nanjing Kangni Mechanical & ElectricalLtd as it was before. This could be an opportunity.

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

This free interactive report on Nanjing Kangni Mechanical & ElectricalLtd's earnings, revenue and cash flow is a great place to start, if you want to investigate the stock further.

What About Dividends?

As well as measuring the share price return, investors should also consider the total shareholder return (TSR). 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. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. We note that for Nanjing Kangni Mechanical & ElectricalLtd the TSR over the last 1 year was 25%, which is better than the share price return mentioned above. This is largely a result of its dividend payments!

A Different Perspective

It's good to see that Nanjing Kangni Mechanical & ElectricalLtd has rewarded shareholders with a total shareholder return of 25% in the last twelve months. That's including the dividend. That gain is better than the annual TSR over five years, which is 2%. Therefore it seems like sentiment around the company has been positive lately. Someone with an optimistic perspective could view the recent improvement in TSR as indicating that the business itself is getting better with time. 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. For instance, we've identified 1 warning sign for Nanjing Kangni Mechanical & ElectricalLtd that you should be aware of.

We will like Nanjing Kangni Mechanical & ElectricalLtd better if we see some big insider buys. While we wait, check out this free list of undervalued stocks (mostly small caps) with considerable, recent, insider 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.