Shandong Xinchao Energy's (SHSE:600777) five-year earnings growth trails the 8.8% YoY shareholder returns

When we invest, we're generally looking for stocks that outperform the market average. And the truth is, you can make significant gains if you buy good quality businesses at the right price. For example, long term Shandong Xinchao Energy Corporation Limited (SHSE:600777) shareholders have enjoyed a 52% share price rise over the last half decade, well in excess of the market return of around 7.2% (not including dividends).

After a strong gain in the past week, it's worth seeing if longer term returns have been driven by improving fundamentals.

View our latest analysis for Shandong Xinchao Energy

To quote Buffett, 'Ships will sail around the world but the Flat Earth Society will flourish. There will continue to be wide discrepancies between price and value in the marketplace...' 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).

During the last half decade, Shandong Xinchao Energy became profitable. That's generally thought to be a genuine positive, so investors may expect to see an increasing share price.

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

This free interactive report on Shandong Xinchao Energy's earnings, revenue and cash flow is a great place to start, if you want to investigate the stock further.

A Different Perspective

Shandong Xinchao Energy shareholders are down 3.1% for the year, but the market itself is up 14%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. Longer term investors wouldn't be so upset, since they would have made 9%, 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. Is Shandong Xinchao Energy cheap compared to other companies? These 3 valuation measures might help you decide.

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.