China Boton Group's (HKG:3318) 396% YoY earnings expansion surpassed the shareholder returns over the past year

Passive investing in index funds can generate returns that roughly match the overall market. But if you pick the right individual stocks, you could make more than that. To wit, the China Boton Group Company Limited (HKG:3318) share price is 80% higher than it was a year ago, much better than the market return of around 26% (not including dividends) in the same period. That's a solid performance by our standards! Zooming out, the stock is actually down 53% in the last three years.

Since the stock has added HK$173m to its market cap in the past week alone, let's see if underlying performance has been driving long-term returns.

Check out our latest analysis for China Boton Group

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. 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.

China Boton Group was able to grow EPS by 396% in the last twelve months. This EPS growth is significantly higher than the 80% increase in the share price. Therefore, it seems the market isn't as excited about China Boton Group as it was before. This could be an opportunity.

The image below shows how EPS has tracked over time (if you click on the image you can see greater detail).

We know that China Boton Group has improved its bottom line lately, but is it going to grow revenue? This free report showing analyst revenue forecasts should help you figure out if the EPS growth can be sustained.

A Different Perspective

It's nice to see that China Boton Group shareholders have received a total shareholder return of 80% over the last year. That gain is better than the annual TSR over five years, which is 6%. 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. It's always interesting to track share price performance over the longer term. But to understand China Boton Group better, we need to consider many other factors. Like risks, for instance. Every company has them, and we've spotted 2 warning signs for China Boton Group (of which 1 makes us a bit uncomfortable!) you should know about.

We will like China Boton Group better if we see some big insider buys. While we wait, check out this free list of undervalued stocks (mostly small caps) with considerable, recent, insider buying.

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.