Optimism for Chengdu Fusen Noble-House IndustrialLtd (SZSE:002818) has grown this past week, despite three-year decline in earnings

By buying an index fund, you can roughly match the market return with ease. But if you buy good businesses at attractive prices, your portfolio returns could exceed the average market return. Just take a look at Chengdu Fusen Noble-House Industrial Co.,Ltd. (SZSE:002818), which is up 20%, over three years, soundly beating the market decline of 18% (not including dividends). On the other hand, the returns haven't been quite so good recently, with shareholders up just 21%, including dividends.

Since the stock has added CN¥838m to its market cap in the past week alone, let's see if underlying performance has been driving long-term returns.

View our latest analysis for Chengdu Fusen Noble-House IndustrialLtd

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).

Over the last three years, Chengdu Fusen Noble-House IndustrialLtd failed to grow earnings per share, which fell 8.9% (annualized).

Thus, it seems unlikely that the market is focussed on EPS growth at the moment. Therefore, we think it's worth considering other metrics as well.

Interestingly, the dividend has increased over time; so that may have given the share price a boost. It could be that the company is reaching maturity and dividend investors are buying for the yield.

You can see below how earnings and revenue have changed over time (discover the exact values by clicking on the image).

This free interactive report on Chengdu Fusen Noble-House IndustrialLtd's balance sheet strength is a great place to start, if you want to investigate the stock further.

What About Dividends?

It is important to consider the total shareholder return, as well as the share price return, for any given stock. The TSR is a return calculation that accounts for the value of cash dividends (assuming that any dividend received was reinvested) and the calculated value of any discounted capital raisings and spin-offs. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. We note that for Chengdu Fusen Noble-House IndustrialLtd the TSR over the last 3 years was 54%, which is better than the share price return mentioned above. The dividends paid by the company have thusly boosted the total shareholder return.

A Different Perspective

It's nice to see that Chengdu Fusen Noble-House IndustrialLtd shareholders have received a total shareholder return of 21% over the last year. And that does include the dividend. That's better than the annualised return of 10% over half a decade, implying that the company is doing better recently. In the best case scenario, this may hint at some real business momentum, implying that now could be a great time to delve deeper. It's always interesting to track share price performance over the longer term. But to understand Chengdu Fusen Noble-House IndustrialLtd better, we need to consider many other factors. Consider for instance, the ever-present spectre of investment risk. We've identified 1 warning sign with Chengdu Fusen Noble-House IndustrialLtd , and understanding them should be part of your investment process.

But note: Chengdu Fusen Noble-House IndustrialLtd 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.