Jiangsu Xiuqiang Glasswork (SZSE:300160) shareholders are still up 63% over 5 years despite pulling back 9.7% in the past week

Generally speaking the aim of active stock picking is to find companies that provide returns that are superior to the market average. And while active stock picking involves risks (and requires diversification) it can also provide excess returns. For example, the Jiangsu Xiuqiang Glasswork Co., Ltd. (SZSE:300160) share price is up 51% in the last 5 years, clearly besting the market return of around 13% (ignoring dividends).

While the stock has fallen 9.7% 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 Jiangsu Xiuqiang Glasswork

While the efficient markets hypothesis continues to be taught by some, it has been proven that markets are over-reactive dynamic systems, and investors are not always rational. 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 the last half decade, Jiangsu Xiuqiang Glasswork became profitable. That's generally thought to be a genuine positive, so investors may expect to see an increasing share price. Since the company was unprofitable five years ago, but not three years ago, it's worth taking a look at the returns in the last three years, too. We can see that the Jiangsu Xiuqiang Glasswork share price is down 13% in the last three years. In the same period, EPS is up 17% per year. So there seems to be a mismatch between the positive EPS growth and the change in the share price, which is down -4% per year.

You can see how EPS has changed over time in the image below (click on the chart to see the exact values).

This free interactive report on Jiangsu Xiuqiang Glasswork'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 incorporates the value of any spin-offs or discounted capital raisings, along with any dividends, based on the assumption that the dividends are reinvested. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. As it happens, Jiangsu Xiuqiang Glasswork's TSR for the last 5 years was 63%, which exceeds the share price return mentioned earlier. The dividends paid by the company have thusly boosted the total shareholder return.

A Different Perspective

While the broader market lost about 10% in the twelve months, Jiangsu Xiuqiang Glasswork shareholders did even worse, losing 20% (even including dividends). Having said that, it's inevitable that some stocks will be oversold in a falling market. The key is to keep your eyes on the fundamental developments. Longer term investors wouldn't be so upset, since they would have made 10%, each year, over five years. It could be that the recent sell-off is an opportunity, so it may be worth checking the fundamental data for signs of a long term growth trend. 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. Even so, be aware that Jiangsu Xiuqiang Glasswork is showing 1 warning sign in our investment analysis , you should know about...

We will like Jiangsu Xiuqiang Glasswork 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.