Shaanxi Fenghuo Electronics (SZSE:000561) delivers shareholders decent 6.6% CAGR over 5 years, surging 14% in the last week alone

Stock pickers are generally looking for stocks that will outperform the broader market. Buying under-rated businesses is one path to excess returns. For example, long term Shaanxi Fenghuo Electronics Co., Ltd. (SZSE:000561) shareholders have enjoyed a 37% share price rise over the last half decade, well in excess of the market return of around 16% (not including dividends). However, more recent returns haven't been as impressive as that, with the stock returning just 1.3% in the last year, including dividends.

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

See our latest analysis for Shaanxi Fenghuo Electronics

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.

Shaanxi Fenghuo Electronics' earnings per share are down 10% per year, despite strong share price performance over five years.

This means it's unlikely the market is judging the company based on earnings growth. Because earnings per share don't seem to match up with the share price, we'll take a look at other metrics instead.

We doubt the modest 0.2% dividend yield is attracting many buyers to the stock. On the other hand, Shaanxi Fenghuo Electronics' revenue is growing nicely, at a compound rate of 3.6% over the last five years. It's quite possible that management are prioritizing revenue growth over EPS growth at the moment.

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

It's probably worth noting that the CEO is paid less than the median at similar sized companies. It's always worth keeping an eye on CEO pay, but a more important question is whether the company will grow earnings throughout the years. This free report showing analyst forecasts should help you form a view on Shaanxi Fenghuo Electronics

A Different Perspective

Shaanxi Fenghuo Electronics shareholders gained a total return of 1.3% during the year. Unfortunately this falls short of the market return. On the bright side, the longer term returns (running at about 7% a year, over half a decade) look better. It's quite possible the business continues to execute with prowess, even as the share price gains are slowing. You might want to assess this data-rich visualization of its earnings, revenue and cash flow.

If you would prefer to check out another company -- one with potentially superior financials -- then do not miss this free list of companies that have proven they can 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.