Investors more bullish on Shandong Ruifeng Chemical (SZSE:300243) this week as stock hikes 12%, despite earnings trending downwards over past year

These days it's easy to simply buy an index fund, and your returns should (roughly) match the market. But you can significantly boost your returns by picking above-average stocks. To wit, the Shandong Ruifeng Chemical Co., Ltd. (SZSE:300243) share price is 65% higher than it was a year ago, much better than the market return of around 12% (not including dividends) in the same period. That's a solid performance by our standards! In contrast, the longer term returns are negative, since the share price is 15% lower than it was three years ago.

The past week has proven to be lucrative for Shandong Ruifeng Chemical investors, so let's see if fundamentals drove the company's one-year performance.

Check out our latest analysis for Shandong Ruifeng Chemical

There is no denying that markets are sometimes efficient, but prices do not always reflect underlying business performance. 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 year, Shandong Ruifeng Chemical actually saw its earnings per share drop 21%.

This means it's unlikely the market is judging the company based on earnings growth. Therefore, it seems likely that investors are putting more weight on metrics other than EPS, at the moment.

We are skeptical of the suggestion that the 0.9% dividend yield would entice buyers to the stock. We think that the revenue growth of 7.8% could have some investors interested. Many businesses do go through a phase where they have to forgo some profits to drive business development, and sometimes its for the best.

The company's revenue and earnings (over time) are depicted in the image below (click to see the exact numbers).

This free interactive report on Shandong Ruifeng Chemical's balance sheet strength is a great place to start, if you want to investigate the stock further.

A Different Perspective

We're pleased to report that Shandong Ruifeng Chemical shareholders have received a total shareholder return of 67% over one year. And that does include the dividend. Since the one-year TSR is better than the five-year TSR (the latter coming in at 10% per year), it would seem that the stock's performance has improved in recent times. In the best case scenario, this may hint at some real business momentum, implying that now could be a great time to delve deeper. I find it very interesting to look at share price over the long term as a proxy for business performance. But to truly gain insight, we need to consider other information, too. For example, we've discovered 4 warning signs for Shandong Ruifeng Chemical (2 are a bit unpleasant!) that you should be aware of before investing here.

Of course Shandong Ruifeng Chemical 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.