Investors in Inner Mongolia MengDian HuaNeng Thermal Power (SHSE:600863) have seen impressive returns of 122% over the past three years

By buying an index fund, you can roughly match the market return with ease. But if you buy good businesses at attractive prices, your portfolio returns could exceed the average market return. For example, Inner Mongolia MengDian HuaNeng Thermal Power Corporation Limited (SHSE:600863) shareholders have seen the share price rise 96% over three years, well in excess of the market decline (26%, not including dividends). On the other hand, the returns haven't been quite so good recently, with shareholders up just 22%, including dividends.

With that in mind, it's worth seeing if the company's underlying fundamentals have been the driver of long term performance, or if there are some discrepancies.

See our latest analysis for Inner Mongolia MengDian HuaNeng Thermal Power

There is no denying that markets are sometimes efficient, but prices do not always reflect underlying business performance. 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.

Inner Mongolia MengDian HuaNeng Thermal Power was able to grow its EPS at 37% per year over three years, sending the share price higher. This EPS growth is higher than the 25% average annual increase in the share price. So it seems investors have become more cautious about the company, over time.

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

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. It might be well worthwhile taking a look at our free report on Inner Mongolia MengDian HuaNeng Thermal Power's earnings, revenue and cash flow.

What About Dividends?

It is important to consider the total shareholder return, as well as the share price return, for any given stock. The TSR incorporates the value of any spin-offs or discounted capital raisings, along with any dividends, based on the assumption that the dividends are reinvested. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. In the case of Inner Mongolia MengDian HuaNeng Thermal Power, it has a TSR of 122% for the last 3 years. That exceeds its share price return that we previously mentioned. And there's no prize for guessing that the dividend payments largely explain the divergence!

A Different Perspective

It's nice to see that Inner Mongolia MengDian HuaNeng Thermal Power shareholders have received a total shareholder return of 22% over the last year. And that does include the dividend. That's better than the annualised return of 14% over half a decade, implying that the company is doing better recently. Someone with an optimistic perspective could view the recent improvement in TSR as indicating that the business itself is getting better with time. While it is well worth considering the different impacts that market conditions can have on the share price, there are other factors that are even more important. For instance, we've identified 1 warning sign for Inner Mongolia MengDian HuaNeng Thermal Power that you should be aware of.

But note: Inner Mongolia MengDian HuaNeng Thermal Power 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.

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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.