Luxshare Precision Industry (SZSE:002475) jumps 4.6% this week, though earnings growth is still tracking behind one-year shareholder returns

If you want to compound wealth in the stock market, you can do so by buying an index fund. But you can significantly boost your returns by picking above-average stocks. For example, the Luxshare Precision Industry Co., Ltd. (SZSE:002475) share price is up 47% in the last 1 year, clearly besting the market return of around 9.7% (not including dividends). That's a solid performance by our standards! In contrast, the longer term returns are negative, since the share price is 12% lower than it was three years ago.

Since the stock has added CN¥13b to its market cap in the past week alone, let's see if underlying performance has been driving long-term returns.

See our latest analysis for Luxshare Precision Industry

While markets are a powerful pricing mechanism, share prices reflect investor sentiment, not just underlying business performance. 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 the last year Luxshare Precision Industry grew its earnings per share (EPS) by 25%. The share price gain of 47% certainly outpaced the EPS growth. So it's fair to assume the market has a higher opinion of the business than it a year ago.

You can see how EPS has changed over time in the image below (click on the chart to see the exact values).

We know that Luxshare Precision Industry 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 nice to see that Luxshare Precision Industry shareholders have received a total shareholder return of 48% over the last year. That's including 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. Someone with an optimistic perspective could view the recent improvement in TSR as indicating that the business itself is getting better with time. Before deciding if you like the current share price, check how Luxshare Precision Industry scores on these 3 valuation metrics.

But note: Luxshare Precision Industry may not be the best stock to buy. So take a peek at this free list of interesting companies with past earnings growth (and further growth forecast).

Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on Chinese exchanges.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.