Despite the downward trend in earnings at Shanghai @hubLtd (SHSE:603881) the stock rallies 13%, bringing one-year gains to 78%

These days it's easy to simply buy an index fund, and your returns should (roughly) match the market. But one can do better than that by picking better than average stocks (as part of a diversified portfolio). For example, the Shanghai @hub Co.,Ltd. (SHSE:603881) share price is up 77% in the last 1 year, clearly besting the market return of around 17% (not including dividends). That's a solid performance by our standards! However, the longer term returns haven't been so impressive, with the stock up just 13% in the last three years.

Since the stock has added CN¥1.6b to its market cap in the past week alone, let's see if underlying performance has been driving long-term returns.

Check out our latest analysis for Shanghai @hubLtd

To paraphrase Benjamin Graham: Over the short term the market is a voting machine, but over the long term it's a weighing machine. By comparing earnings per share (EPS) and share price changes over time, we can get a feel for how investor attitudes to a company have morphed over time.

Over the last twelve months, Shanghai @hubLtd actually shrank its EPS by 13%.

Given the share price gain, we doubt the market is measuring progress with EPS. Since the change in EPS doesn't seem to correlate with the change in share price, it's worth taking a look at other metrics.

We doubt the modest 0.2% dividend yield is doing much to support the share price. However the year on year revenue growth of 9.0% would help. Many businesses do go through a phase where they have to forgo some profits to drive business development, and sometimes its for the best.

You can see how earnings and revenue have changed over time in the image below (click on the chart to see the exact values).

We're pleased to report that the CEO is remunerated more modestly than most CEOs at similarly capitalized companies. But while CEO remuneration is always worth checking, the really important question is whether the company can grow earnings going forward. So it makes a lot of sense to check out what analysts think Shanghai @hubLtd will earn in the future (free profit forecasts).

A Different Perspective

We're pleased to report that Shanghai @hubLtd shareholders have received a total shareholder return of 78% over one year. Of course, that includes the dividend. That gain is better than the annual TSR over five years, which is 4%. Therefore it seems like sentiment around the company has been positive lately. Given the share price momentum remains strong, it might be worth taking a closer look at the stock, lest you miss an opportunity. It's always interesting to track share price performance over the longer term. But to understand Shanghai @hubLtd better, we need to consider many other factors. For example, we've discovered 2 warning signs for Shanghai @hubLtd (1 is significant!) that you should be aware of before investing here.

For those who like to find winning investments this free list of undervalued companies with recent insider purchasing, could be just the ticket.

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.