JD.com's (NASDAQ:JD) 80% return outpaced the company's earnings growth over the same one-year period

The simplest way to invest in stocks is to buy exchange traded funds. But investors can boost returns by picking market-beating companies to own shares in. For example, the JD.com, Inc. (NASDAQ:JD) share price is up 75% in the last 1 year, clearly besting the market return of around 24% (not including dividends). If it can keep that out-performance up over the long term, investors will do very well! In contrast, the longer term returns are negative, since the share price is 47% lower than it was three years ago.

The past week has proven to be lucrative for JD.com investors, so let's see if fundamentals drove the company's one-year performance.

See our latest analysis for JD.com

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.

During the last year JD.com grew its earnings per share (EPS) by 51%. The share price gain of 75% certainly outpaced the EPS growth. So it's fair to assume the market has a higher opinion of the business than it a year ago.

The graphic below depicts how EPS has changed over time (unveil the exact values by clicking on the image).

We know that JD.com has improved its bottom line lately, but is it going to grow revenue? You could check out this free report showing analyst revenue forecasts.

What About Dividends?

When looking at investment returns, it is important to consider the difference between total shareholder return (TSR) and share price return. Whereas the share price return only reflects the change in the share price, the TSR includes the value of dividends (assuming they were reinvested) and the benefit of any discounted capital raising or spin-off. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. We note that for JD.com the TSR over the last 1 year was 80%, which is better than the share price return mentioned above. And there's no prize for guessing that the dividend payments largely explain the divergence!

A Different Perspective

It's good to see that JD.com has rewarded shareholders with a total shareholder return of 80% in the last twelve months. And that does include the dividend. Since the one-year TSR is better than the five-year TSR (the latter coming in at 1.1% per year), it would seem that the stock's performance has improved in recent times. In the best case scenario, this may hint at some real business momentum, implying that now could be a great time to delve deeper. Before forming an opinion on JD.com you might want to consider these 3 valuation metrics.

If you like to buy stocks alongside management, then you might just love this free list of companies. (Hint: many of them are unnoticed AND have attractive valuation).

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