Tongfu MicroelectronicsLtd (SZSE:002156) shareholders have earned a 18% CAGR over the last three years

By buying an index fund, you can roughly match the market return with ease. But if you pick the right individual stocks, you could make more than that. Just take a look at Tongfu Microelectronics Co.,Ltd (SZSE:002156), which is up 63%, over three years, soundly beating the market decline of 15% (not including dividends).

So let's assess the underlying fundamentals over the last 3 years and see if they've moved in lock-step with shareholder returns.

Check out our latest analysis for Tongfu MicroelectronicsLtd

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 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 three years of share price growth, Tongfu MicroelectronicsLtd moved from a loss to profitability. So we would expect a higher share price over the period.

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

We know that Tongfu MicroelectronicsLtd has improved its bottom line lately, but is it going to grow revenue? This free report showing analyst revenue forecasts should help you figure out if the EPS growth can be sustained.

A Different Perspective

It's good to see that Tongfu MicroelectronicsLtd has rewarded shareholders with a total shareholder return of 56% in the last twelve months. And that does include the dividend. That gain is better than the annual TSR over five years, which is 1.5%. Therefore it seems like sentiment around the company has been positive lately. Someone with an optimistic perspective could view the recent improvement in TSR as indicating that the business itself is getting better with time. 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 instance, we've identified 1 warning sign for Tongfu MicroelectronicsLtd that you should be aware of.

If you are like me, then you will not want to miss this free list of undervalued small caps that insiders are buying.

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.