Shanghai Fortune Techgroup's (SZSE:300493) 5.6% YoY earnings expansion surpassed the shareholder returns over the past five years

Stock pickers are generally looking for stocks that will outperform the broader market. And while active stock picking involves risks (and requires diversification) it can also provide excess returns. For example, long term Shanghai Fortune Techgroup Co., Ltd. (SZSE:300493) shareholders have enjoyed a 21% share price rise over the last half decade, well in excess of the market return of around 0.8% (not including dividends). On the other hand, the more recent gains haven't been so impressive, with shareholders gaining just 3.0%, including dividends.

The past week has proven to be lucrative for Shanghai Fortune Techgroup investors, so let's see if fundamentals drove the company's five-year performance.

Check out our latest analysis for Shanghai Fortune Techgroup

While the efficient markets hypothesis continues to be taught by some, it has been proven that markets are over-reactive dynamic systems, and investors are not always rational. 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 half a decade, Shanghai Fortune Techgroup managed to grow its earnings per share at 31% a year. The EPS growth is more impressive than the yearly share price gain of 4% over the same period. So it seems the market isn't so enthusiastic about the stock these days. Having said that, the market is still optimistic, given the P/E ratio of 105.89.

You can see below how EPS has changed over time (discover the exact values by clicking on the image).

It might be well worthwhile taking a look at our free report on Shanghai Fortune Techgroup's earnings, revenue and cash flow.

What About Dividends?

As well as measuring the share price return, investors should also consider the total shareholder return (TSR). The TSR incorporates the value of any spin-offs or discounted capital raisings, along with any dividends, based on the assumption that the dividends are reinvested. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. In the case of Shanghai Fortune Techgroup, it has a TSR of 24% for the last 5 years. That exceeds its share price return that we previously mentioned. This is largely a result of its dividend payments!

A Different Perspective

It's good to see that Shanghai Fortune Techgroup has rewarded shareholders with a total shareholder return of 3.0% in the last twelve months. Of course, that includes the dividend. Having said that, the five-year TSR of 4% a year, is even better. Potential buyers might understandably feel they've missed the opportunity, but it's always possible business is still firing on all cylinders. 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 Shanghai Fortune Techgroup that you should be aware of.

We will like Shanghai Fortune Techgroup better if we see some big insider buys. While we wait, check out this free list of undervalued stocks (mostly small caps) with considerable, recent, insider 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.