Xin Yuan Enterprises Group's (HKG:1748) three-year earnings growth trails the favorable shareholder returns

By buying an index fund, investors can approximate the average market return. But if you choose individual stocks with prowess, you can make superior returns. Just take a look at Xin Yuan Enterprises Group Limited (HKG:1748), which is up 96%, over three years, soundly beating the market decline of 21% (not including dividends).

Since it's been a strong week for Xin Yuan Enterprises Group shareholders, let's have a look at trend of the longer term fundamentals.

View our latest analysis for Xin Yuan Enterprises Group

To quote Buffett, 'Ships will sail around the world but the Flat Earth Society will flourish. There will continue to be wide discrepancies between price and value in the marketplace...' 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.

Xin Yuan Enterprises Group was able to grow its EPS at 18% per year over three years, sending the share price higher. In comparison, the 25% per year gain in the share price outpaces the EPS growth. This suggests that, as the business progressed over the last few years, it gained the confidence of market participants. It's not unusual to see the market 're-rate' a stock, after a few years of growth.

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

We like that insiders have been buying shares in the last twelve months. Having said that, most people consider earnings and revenue growth trends to be a more meaningful guide to the business. This free interactive report on Xin Yuan Enterprises Group's earnings, revenue and cash flow is a great place to start, if you want to investigate the stock further.

A Different Perspective

We can sympathize with Xin Yuan Enterprises Group about their 1.9% loss for the year, but the silver lining is that the broader market return was worse, at around -2.7%. Shareholders who have held for three years might be relatively sanguine about the recent weakness, given they have made 25% per year for three years. It's possible that the recent share price decline has more to do with the negative broader market returns than any company specific development. 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. To that end, you should learn about the 2 warning signs we've spotted with Xin Yuan Enterprises Group (including 1 which is significant) .

Xin Yuan Enterprises Group is not the only stock insiders are buying. So take a peek at this free list of growing companies with 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.