Despite shrinking by CN¥1.8b in the past week, China National Software & Service (SHSE:600536) shareholders are still up 78% over 3 years

By buying an index fund, investors can approximate the average market return. But many of us dare to dream of bigger returns, and build a portfolio ourselves. Just take a look at China National Software & Service Company Limited (SHSE:600536), which is up 77%, over three years, soundly beating the market decline of 19% (not including dividends). On the other hand, the returns haven't been quite so good recently, with shareholders up just 37%.

Although China National Software & Service has shed CN¥1.8b from its market cap this week, let's take a look at its longer term fundamental trends and see if they've driven returns.

View our latest analysis for China National Software & Service

In his essay The Superinvestors of Graham-and-Doddsville Warren Buffett described how share prices do not always rationally reflect the value of a business. 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.

Over the last three years, China National Software & Service failed to grow earnings per share, which fell 92% (annualized). In this instance, recent extraordinary items impacted the earnings.

So we doubt that the market is looking to EPS for its main judge of the company's value. Therefore, we think it's worth considering other metrics as well.

You can only imagine how long term shareholders feel about the declining revenue trend (slipping at 21% per year). What's clear is that historic earnings and revenue aren't matching up with the share price action, very well. So you might have to dig deeper to get a grasp of the situation

The image below shows how earnings and revenue have tracked over time (if you click on the image you can see greater detail).

You can see how its balance sheet has strengthened (or weakened) over time in this free interactive graphic.

A Different Perspective

It's nice to see that China National Software & Service shareholders have received a total shareholder return of 37% over the last year. That's better than the annualised return of 4% over half a decade, implying that the company is doing better recently. Given the share price momentum remains strong, it might be worth taking a closer look at the stock, lest you miss an opportunity. Shareholders might want to examine this detailed historical graph of past earnings, revenue and cash flow.

Of course, you might find a fantastic investment by looking elsewhere. So take a peek at this free list of companies we expect will grow earnings.

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.