Despite shrinking by CN¥2.7b in the past week, Inner Mongolia Baotou Steel Union (SHSE:600010) shareholders are still up 37% over 5 years

When we invest, we're generally looking for stocks that outperform the market average. Buying under-rated businesses is one path to excess returns. For example, the Inner Mongolia Baotou Steel Union Co., Ltd. (SHSE:600010) share price is up 36% in the last 5 years, clearly besting the market return of around 10% (ignoring dividends). However, more recent returns haven't been as impressive as that, with the stock returning just 28% in the last year.

In light of the stock dropping 3.1% in the past week, we want to investigate the longer term story, and see if fundamentals have been the driver of the company's positive five-year return.

See our latest analysis for Inner Mongolia Baotou Steel Union

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 five years of share price growth, Inner Mongolia Baotou Steel Union actually saw its EPS drop 25% per year.

Essentially, it doesn't seem likely that investors are focused on EPS. Because earnings per share don't seem to match up with the share price, we'll take a look at other metrics instead.

We are not particularly impressed by the annual compound revenue growth of 2.3% over five years. So why is the share price up? It's not immediately obvious to us, but a closer look at the company's progress over time might yield answers.

The image below shows how earnings and revenue have tracked over time (if you click on the image you can see greater detail).

If you are thinking of buying or selling Inner Mongolia Baotou Steel Union stock, you should check out this FREE detailed report on its balance sheet.

A Different Perspective

It's good to see that Inner Mongolia Baotou Steel Union has rewarded shareholders with a total shareholder return of 28% in the last twelve months. That gain is better than the annual TSR over five years, which is 6%. Therefore it seems like sentiment around the company has been positive lately. Given the share price momentum remains strong, it might be worth taking a closer look at the stock, lest you miss an opportunity. 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 2 warning signs with Inner Mongolia Baotou Steel Union , and understanding them should be part of your investment process.

But note: Inner Mongolia Baotou Steel Union may not be the best stock to buy. So take a peek at this free list of interesting companies with past earnings growth (and further growth forecast).

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.