The one-year decline in earnings for Shenzhen Center Power Tech SZSE:002733) isn't encouraging, but shareholders are still up 31% over that period

Passive investing in index funds can generate returns that roughly match the overall market. But investors can boost returns by picking market-beating companies to own shares in. To wit, the Shenzhen Center Power Tech. Co., Ltd (SZSE:002733) share price is 30% higher than it was a year ago, much better than the market return of around 9.7% (not including dividends) in the same period. So that should have shareholders smiling. The longer term returns have not been as good, with the stock price only 2.9% higher than it was three years ago.

Since the long term performance has been good but there's been a recent pullback of 9.9%, let's check if the fundamentals match the share price.

View our latest analysis for Shenzhen Center Power Tech

While markets are a powerful pricing mechanism, share prices reflect investor sentiment, not just 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.

Over the last twelve months, Shenzhen Center Power Tech actually shrank its EPS by 64%.

This means it's unlikely the market is judging the company based on earnings growth. Therefore, it seems likely that investors are putting more weight on metrics other than EPS, at the moment.

We doubt the modest 0.8% dividend yield is doing much to support the share price. Unfortunately Shenzhen Center Power Tech's fell 22% over twelve months. So using a snapshot of key business metrics doesn't give us a good picture of why the market is bidding up the stock.

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

This free interactive report on Shenzhen Center Power Tech's balance sheet strength is a great place to start, if you want to investigate the stock further.

A Different Perspective

It's nice to see that Shenzhen Center Power Tech shareholders have received a total shareholder return of 31% over the last year. Of course, that includes the dividend. There's no doubt those recent returns are much better than the TSR loss of 4% per year over five years. The long term loss makes us cautious, but the short term TSR gain certainly hints at a brighter future. 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. For example, we've discovered 4 warning signs for Shenzhen Center Power Tech (1 is concerning!) that you should be aware of before investing here.

If you like to buy stocks alongside management, then you might just love this free list of companies. (Hint: many of them are unnoticed AND have attractive valuation).

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.