Shanghai Dazhong Public Utilities(Group)Ltd's (SHSE:600635) one-year total shareholder returns outpace the underlying earnings growth

Passive investing in index funds can generate returns that roughly match the overall market. But investors can boost returns by picking market-beating companies to own shares in. To wit, the Shanghai Dazhong Public Utilities(Group) Co.,Ltd. (SHSE:600635) share price is 42% higher than it was a year ago, much better than the market return of around 9.7% (not including dividends) in the same period. That's a solid performance by our standards! However, the stock hasn't done so well in the longer term, with the stock only up 13% in three years.

Since the long term performance has been good but there's been a recent pullback of 7.9%, let's check if the fundamentals match the share price.

View our latest analysis for Shanghai Dazhong Public Utilities(Group)Ltd

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 imperfect but simple way to consider how the market perception of a company has shifted is to compare the change in the earnings per share (EPS) with the share price movement.

Shanghai Dazhong Public Utilities(Group)Ltd went from making a loss to reporting a profit, in the last year.

While it's good to see positive EPS of CN¥0.037 this year, the loss wasn't too bad last year. We'd argue the positive share price reflects the move to profitability. Some investors scan for companies that have just become profitable, since that's an important business development milestone.

The company's earnings per share (over time) is depicted in the image below (click to see the exact numbers).

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

A Different Perspective

We're pleased to report that Shanghai Dazhong Public Utilities(Group)Ltd shareholders have received a total shareholder return of 44% over one year. That's including the dividend. Notably the five-year annualised TSR loss of 0.2% per year compares very unfavourably with the recent share price performance. This makes us a little wary, but the business might have turned around its fortunes. It's always interesting to track share price performance over the longer term. But to understand Shanghai Dazhong Public Utilities(Group)Ltd better, we need to consider many other factors. Even so, be aware that Shanghai Dazhong Public Utilities(Group)Ltd is showing 4 warning signs in our investment analysis , and 3 of those are a bit unpleasant...

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.