Despite shrinking by CN¥483m in the past week, Advanced Technology & Materials (SZSE:000969) shareholders are still up 89% over 5 years

Stock pickers are generally looking for stocks that will outperform the broader market. Buying under-rated businesses is one path to excess returns. To wit, the Advanced Technology & Materials share price has climbed 85% in five years, easily topping the market return of 8.4% (ignoring dividends).

In light of the stock dropping 3.8% 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.

Check out our latest analysis for Advanced Technology & Materials

To paraphrase Benjamin Graham: Over the short term the market is a voting machine, but over the long term it's a weighing machine. 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, Advanced Technology & Materials became profitable. That would generally be considered a positive, so we'd hope to see the share price to rise. Given that the company made a profit three years ago, but not five years ago, it is worth looking at the share price returns over the last three years, too. Indeed, the Advanced Technology & Materials share price has gained 32% in three years. During the same period, EPS grew by 27% each year. This EPS growth is higher than the 10% average annual increase in the share price over the same three years. Therefore, it seems the market has moderated its expectations for growth, somewhat.

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

We know that Advanced Technology & Materials has improved its bottom line lately, but is it going to grow revenue? You could check out this free report showing analyst revenue forecasts.

What About Dividends?

As well as measuring the share price return, investors should also consider the total shareholder return (TSR). Whereas the share price return only reflects the change in the share price, the TSR includes the value of dividends (assuming they were reinvested) and the benefit of any discounted capital raising or spin-off. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. We note that for Advanced Technology & Materials the TSR over the last 5 years was 89%, which is better than the share price return mentioned above. And there's no prize for guessing that the dividend payments largely explain the divergence!

A Different Perspective

We're pleased to report that Advanced Technology & Materials shareholders have received a total shareholder return of 71% over one year. That's including the dividend. That gain is better than the annual TSR over five years, which is 14%. Therefore it seems like sentiment around the company has been positive lately. In the best case scenario, this may hint at some real business momentum, implying that now could be a great time to delve deeper. 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 risks, for instance. Every company has them, and we've spotted 1 warning sign for Advanced Technology & Materials you should know about.

Of course Advanced Technology & Materials may not be the best stock to buy. So you may wish to see this free collection of growth stocks.

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.