Earnings growth outpaced the favorable 54% return delivered to Sunny Optical Technology (Group) (HKG:2382) shareholders over the last 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 Sunny Optical Technology (Group) Company Limited (HKG:2382) share price is 52% higher than it was a year ago, much better than the market return of around 28% (not including dividends) in the same period. So that should have shareholders smiling. On the other hand, longer term shareholders have had a tougher run, with the stock falling 33% in three years.

After a strong gain in the past week, it's worth seeing if longer term returns have been driven by improving fundamentals.

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

During the last year Sunny Optical Technology (Group) grew its earnings per share (EPS) by 146%. It's fair to say that the share price gain of 52% did not keep pace with the EPS growth. So it seems like the market has cooled on Sunny Optical Technology (Group), despite the growth. Interesting.

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

We know that Sunny Optical Technology (Group) has improved its bottom line lately, but is it going to grow revenue? Check if analysts think Sunny Optical Technology (Group) will grow revenue in the future.

A Different Perspective

It's good to see that Sunny Optical Technology (Group) has rewarded shareholders with a total shareholder return of 54% in the last twelve months. And that does include the dividend. Notably the five-year annualised TSR loss of 7% per year compares very unfavourably with the recent share price performance. We generally put more weight on the long term performance over the short term, but the recent improvement could hint at a (positive) inflection point within the business. Before deciding if you like the current share price, check how Sunny Optical Technology (Group) scores on these 3 valuation metrics.

If you are like me, then you will not want to miss this free list of undervalued small caps that insiders are 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.