Guangdong Rifeng Electric Cable (SZSE:002953) jumps 9.4% this week, though earnings growth is still tracking behind five-year shareholder returns

These days it's easy to simply buy an index fund, and your returns should (roughly) match the market. But the truth is, you can make significant gains if you buy good quality businesses at the right price. For example, the Guangdong Rifeng Electric Cable Co., Ltd. (SZSE:002953) share price is up 17% in the last five years, slightly above the market return. Over the last year the stock price is up, albeit only a modest 1.8%.

The past week has proven to be lucrative for Guangdong Rifeng Electric Cable investors, so let's see if fundamentals drove the company's five-year performance.

Check out our latest analysis for Guangdong Rifeng Electric Cable

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 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.

During five years of share price growth, Guangdong Rifeng Electric Cable achieved compound earnings per share (EPS) growth of 1.6% per year. This EPS growth is lower than the 3% average annual increase in the share price. This suggests that market participants hold the company in higher regard, these days. That's not necessarily surprising considering the five-year track record of earnings growth.

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

Dive deeper into Guangdong Rifeng Electric Cable's key metrics by checking this interactive graph of Guangdong Rifeng Electric Cable's earnings, revenue and cash flow.

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. As it happens, Guangdong Rifeng Electric Cable's TSR for the last 5 years was 21%, which exceeds the share price return mentioned earlier. This is largely a result of its dividend payments!

A Different Perspective

Guangdong Rifeng Electric Cable shareholders are up 2.8% for the year (even including dividends). But that was short of the market average. It's probably a good sign that the company has an even better long term track record, having provided shareholders with an annual TSR of 4% over five years. Maybe the share price is just taking a breather while the business executes on its growth strategy. 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. Consider for instance, the ever-present spectre of investment risk. We've identified 1 warning sign with Guangdong Rifeng Electric Cable , and understanding them should be part of your investment process.

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.