China Western Power Industrial (SZSE:002630) spikes 10% this week, taking three-year gains to 52%

By buying an index fund, you can roughly match the market return with ease. But if you pick the right individual stocks, you could make more than that. For example, China Western Power Industrial Co., Ltd. (SZSE:002630) shareholders have seen the share price rise 52% over three years, well in excess of the market decline (22%, not including dividends). However, more recent returns haven't been as impressive as that, with the stock returning just 39% in the last year.

The past week has proven to be lucrative for China Western Power Industrial investors, so let's see if fundamentals drove the company's three-year performance.

See our latest analysis for China Western Power Industrial

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

China Western Power Industrial became profitable within the last three years. So we would expect a higher share price over the period.

The image below shows how EPS has tracked over time (if you click on the image you can see greater detail).

This free interactive report on China Western Power Industrial's earnings, revenue and cash flow is a great place to start, if you want to investigate the stock further.

A Different Perspective

It's nice to see that China Western Power Industrial shareholders have received a total shareholder return of 39% over the last year. That's better than the annualised return of 8% 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. Case in point: We've spotted 2 warning signs for China Western Power Industrial you should be aware of, and 1 of them is significant.

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.