The 14% return this week takes Jinjian Cereals IndustryLtd's (SHSE:600127) shareholders five-year gains to 67%

Generally speaking the aim of active stock picking is to find companies that provide returns that are superior to the market average. Buying under-rated businesses is one path to excess returns. To wit, the Jinjian Cereals IndustryLtd share price has climbed 67% in five years, easily topping the market return of 7.8% (ignoring dividends).

On the back of a solid 7-day performance, let's check what role the company's fundamentals have played in driving long term shareholder returns.

Check out our latest analysis for Jinjian Cereals IndustryLtd

There is no denying that markets are sometimes efficient, but prices do not always reflect underlying business performance. One flawed but reasonable way to assess how sentiment around a company has changed is to compare the earnings per share (EPS) with the share price.

During the five years of share price growth, Jinjian Cereals IndustryLtd moved from a loss to profitability. 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 Jinjian Cereals IndustryLtd share price is down 13% in the last three years. In the same period, EPS is up 5.0% per year. It would appear there's a real mismatch between the increasing EPS and the share price, which has declined -4% a year for three years.

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

Dive deeper into Jinjian Cereals IndustryLtd's key metrics by checking this interactive graph of Jinjian Cereals IndustryLtd's earnings, revenue and cash flow.

A Different Perspective

Jinjian Cereals IndustryLtd shareholders are down 5.4% over twelve months, which isn't far from the market return of -6.0%. Longer term investors wouldn't be so upset, since they would have made 11%, each year, over five years. If the stock price has been impacted by changing sentiment, rather than deteriorating business conditions, it could spell opportunity. It's always interesting to track share price performance over the longer term. But to understand Jinjian Cereals IndustryLtd better, we need to consider many other factors. For instance, we've identified 2 warning signs for Jinjian Cereals IndustryLtd (1 is a bit unpleasant) that you should be aware of.

If you would prefer to check out another company -- one with potentially superior financials -- then do not miss this free list of companies that have proven they can grow earnings.

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.