Earnings growth outpaced the respectable 14% CAGR delivered to Shenzhen TVT Digital Technology (SZSE:002835) shareholders over the last five years

Stock pickers are generally looking for stocks that will outperform the broader market. And the truth is, you can make significant gains if you buy good quality businesses at the right price. To wit, the Shenzhen TVT Digital Technology share price has climbed 85% in five years, easily topping the market return of 3.2% (ignoring dividends).

The past week has proven to be lucrative for Shenzhen TVT Digital Technology investors, so let's see if fundamentals drove the company's five-year performance.

See our latest analysis for Shenzhen TVT Digital Technology

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, Shenzhen TVT Digital Technology managed to grow its earnings per share at 101% a year. This EPS growth is higher than the 13% average annual increase in the share price. So one could conclude that the broader market has become more cautious towards the stock.

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

Before buying or selling a stock, we always recommend a close examination of historic growth trends, available here.

What About Dividends?

As well as measuring the share price return, investors should also consider the total shareholder return (TSR). Whereas the share price return only reflects the change in the share price, the TSR includes the value of dividends (assuming they were reinvested) and the benefit of any discounted capital raising or spin-off. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. We note that for Shenzhen TVT Digital Technology the TSR over the last 5 years was 93%, which is better than the share price return mentioned above. And there's no prize for guessing that the dividend payments largely explain the divergence!

A Different Perspective

Although it hurts that Shenzhen TVT Digital Technology returned a loss of 9.5% in the last twelve months, the broader market was actually worse, returning a loss of 17%. Of course, the long term returns are far more important and the good news is that over five years, the stock has returned 14% for each year. It could be that the business is just facing some short term problems, but shareholders should keep a close eye on the fundamentals. It's always interesting to track share price performance over the longer term. But to understand Shenzhen TVT Digital Technology better, we need to consider many other factors. For example, we've discovered 2 warning signs for Shenzhen TVT Digital Technology 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.

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