HUTCHMED (China) (LON:HCM) delivers shareholders decent 11% CAGR over 3 years, surging 3.3% in the last week alone

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. Just take a look at HUTCHMED (China) Limited (LON:HCM), which is up 39%, over three years, soundly beating the market return of 7.8% (not including dividends).

Since the stock has added UK£64m to its market cap in the past week alone, let's see if underlying performance has been driving long-term returns.

Our free stock report includes 2 warning signs investors should be aware of before investing in HUTCHMED (China). Read for free now.

While markets are a powerful pricing mechanism, share prices reflect investor sentiment, not just underlying business performance. 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).

HUTCHMED (China) became profitable within the last three years. That would generally be considered a positive, so we'd expect the share price to be up.

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 HUTCHMED (China) has improved its bottom line over the last three years, but what does the future have in store? This free interactive report on HUTCHMED (China)'s balance sheet strength is a great place to start, if you want to investigate the stock further.

A Different Perspective

Investors in HUTCHMED (China) had a tough year, with a total loss of 25%, against a market gain of about 6.5%. Even the share prices of good stocks drop sometimes, but we want to see improvements in the fundamental metrics of a business, before getting too interested. Regrettably, last year's performance caps off a bad run, with the shareholders facing a total loss of 5% per year over five years. Generally speaking long term share price weakness can be a bad sign, though contrarian investors might want to research the stock in hope of a turnaround. I find it very interesting to look at share price over the long term as a proxy for business performance. But to truly gain insight, we need to consider other information, too. Case in point: We've spotted 2 warning signs for HUTCHMED (China) you should be aware of.

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 British 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.