Despite the downward trend in earnings at People's Insurance Company (Group) of China (HKG:1339) the stock lifts 3.0%, bringing three-year gains to 37%

By buying an index fund, investors can approximate the average market return. But if you pick the right individual stocks, you could make more than that. For example, The People's Insurance Company (Group) of China Limited (HKG:1339) shareholders have seen the share price rise 12% over three years, well in excess of the market decline (23%, not including dividends). However, more recent returns haven't been as impressive as that, with the stock returning just 12% in the last year, including dividends.

Since it's been a strong week for People's Insurance Company (Group) of China shareholders, let's have a look at trend of the longer term fundamentals.

Check out our latest analysis for People's Insurance Company (Group) of China

To paraphrase Benjamin Graham: Over the short term the market is a voting machine, but over the long term it's a weighing machine. 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.

Over the last three years, People's Insurance Company (Group) of China failed to grow earnings per share, which fell 4.1% (annualized).

While EPS is down but the share price is moving up, neither move is particularly drastic, suggesting the market was previously too pessimistic. Ultimately, though, we don't think it can maintain share price gains without turning around the EPS growth.

You can see below how EPS has changed over time (discover the exact values by clicking on the image).

It's probably worth noting that the CEO is paid less than the median at similar sized companies. But while CEO remuneration is always worth checking, the really important question is whether the company can grow earnings going forward. 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). The TSR is a return calculation that accounts for the value of cash dividends (assuming that any dividend received was reinvested) and the calculated value of any discounted capital raisings and spin-offs. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. As it happens, People's Insurance Company (Group) of China's TSR for the last 3 years was 37%, which exceeds the share price return mentioned earlier. This is largely a result of its dividend payments!

A Different Perspective

We're pleased to report that People's Insurance Company (Group) of China shareholders have received a total shareholder return of 12% over one year. And that does include the dividend. That gain is better than the annual TSR over five years, which is 5%. Therefore it seems like sentiment around the company has been positive lately. Given the share price momentum remains strong, it might be worth taking a closer look at the stock, lest you miss an opportunity. 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. To that end, you should be aware of the 2 warning signs we've spotted with People's Insurance Company (Group) of China .

Of course People's Insurance Company (Group) of China may not be the best stock to buy. So you may wish to see this free collection of growth stocks.

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