Nine Dragons Paper (Holdings) (HKG:2689) delivers shareholders respectable 69% return over 1 year, surging 13% in the last week alone

If you want to compound wealth in the stock market, you can do so by buying an index fund. But you can significantly boost your returns by picking above-average stocks. For example, the Nine Dragons Paper (Holdings) Limited (HKG:2689) share price is up 69% in the last 1 year, clearly besting the market return of around 43% (not including dividends). If it can keep that out-performance up over the long term, investors will do very well! On the other hand, longer term shareholders have had a tougher run, with the stock falling 27% in three years.

Since it's been a strong week for Nine Dragons Paper (Holdings) shareholders, let's have a look at trend of the longer term fundamentals.

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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 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.

During the last year Nine Dragons Paper (Holdings) grew its earnings per share, moving from a loss to a profit.

When a company is just on the edge of profitability it can be well worth considering other metrics in order to more precisely gauge growth (and therefore understand share price movements).

However the year on year revenue growth of 11% would help. We do see some companies suppress earnings in order to accelerate revenue growth.

The image below shows how earnings and revenue have tracked over time (if you click on the image you can see greater detail).

Nine Dragons Paper (Holdings) is a well known stock, with plenty of analyst coverage, suggesting some visibility into future growth. If you are thinking of buying or selling Nine Dragons Paper (Holdings) stock, you should check out this free report showing analyst consensus estimates for future profits.

A Different Perspective

It's nice to see that Nine Dragons Paper (Holdings) shareholders have received a total shareholder return of 69% over the last year. Notably the five-year annualised TSR loss of 6% 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 Nine Dragons Paper (Holdings) better, we need to consider many other factors. Take risks, for example - Nine Dragons Paper (Holdings) has 1 warning sign we think you should be aware of.

Of course, you might find a fantastic investment by looking elsewhere. So take a peek at this free list of companies we expect will grow earnings.

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.