Despite shrinking by CN¥938m in the past week, Henan Thinker Automatic EquipmentLtd (SHSE:603508) shareholders are still up 88% over 3 years

One simple way to benefit from the stock market is to buy an index fund. But if you choose individual stocks with prowess, you can make superior returns. For example, Henan Thinker Automatic Equipment Co.,Ltd. (SHSE:603508) shareholders have seen the share price rise 66% over three years, well in excess of the market decline (20%, not including dividends). On the other hand, the returns haven't been quite so good recently, with shareholders up just 30%, including dividends.

While the stock has fallen 9.8% this week, it's worth focusing on the longer term and seeing if the stocks historical returns have been driven by the underlying fundamentals.

See our latest analysis for Henan Thinker Automatic EquipmentLtd

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. 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).

Henan Thinker Automatic EquipmentLtd became profitable within the last three years. So we would expect a higher share price over the period.

The company's earnings per share (over time) is depicted in the image below (click to see the exact numbers).

We know that Henan Thinker Automatic EquipmentLtd has improved its bottom line over the last three years, but what does the future have in store? Take a more thorough look at Henan Thinker Automatic EquipmentLtd's financial health with this free 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). 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. In the case of Henan Thinker Automatic EquipmentLtd, it has a TSR of 88% for the last 3 years. That exceeds its share price return that we previously mentioned. And there's no prize for guessing that the dividend payments largely explain the divergence!

A Different Perspective

It's nice to see that Henan Thinker Automatic EquipmentLtd shareholders have received a total shareholder return of 30% over the last year. That's including the dividend. That certainly beats the loss of about 3% per year over the last half decade. We generally put more weight on the long term performance over the short term, but the recent improvement could hint at a (positive) inflection point within the business. It's always interesting to track share price performance over the longer term. But to understand Henan Thinker Automatic EquipmentLtd better, we need to consider many other factors. For instance, we've identified 2 warning signs for Henan Thinker Automatic EquipmentLtd that you should be aware of.

Of course Henan Thinker Automatic EquipmentLtd 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.