When we invest, we're generally looking for stocks that outperform the market average. And in our experience, buying the right stocks can give your wealth a significant boost. For example, the GigaDevice Semiconductor (Beijing) Inc. (SHSE:603986) share price is up 72% in the last 5 years, clearly besting the market return of around 0.3% (ignoring dividends).

Since the stock has added CN¥5.2b 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 GigaDevice Semiconductor (Beijing)

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 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 five years of share price growth, GigaDevice Semiconductor (Beijing) achieved compound earnings per share (EPS) growth of 44% per year. This EPS growth is higher than the 12% average annual increase in the share price. So it seems the market isn't so enthusiastic about the stock these days.

The company's earnings per share (over time) is depicted in the image below (click to see the exact numbers).

We know that GigaDevice Semiconductor (Beijing) has improved its bottom line over the last three years, but what does the future have in store? Take a more thorough look at GigaDevice Semiconductor (Beijing)'s financial health with this free report on its balance sheet.

What About Dividends?

It is important to consider the total shareholder return, as well as the share price return, for any given stock. The TSR is a return calculation that accounts for the value of cash dividends (assuming that any dividend received was reinvested) and the calculated value of any discounted capital raisings and spin-offs. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. As it happens, GigaDevice Semiconductor (Beijing)'s TSR for the last 5 years was 75%, which exceeds the share price return mentioned earlier. This is largely a result of its dividend payments!

A Different Perspective

While the broader market lost about 19% in the twelve months, GigaDevice Semiconductor (Beijing) shareholders did even worse, losing 41% (even including dividends). Having said that, it's inevitable that some stocks will be oversold in a falling market. The key is to keep your eyes on the fundamental developments. Longer term investors wouldn't be so upset, since they would have made 12%, each year, over five years. It could be that the recent sell-off is an opportunity, so it may be worth checking the fundamental data for signs of a long term growth trend. While it is well worth considering the different impacts that market conditions can have on the share price, there are other factors that are even more important. Even so, be aware that GigaDevice Semiconductor (Beijing) is showing 3 warning signs in our investment analysis , and 1 of those is significant...

But note: GigaDevice Semiconductor (Beijing) may not be the best stock to buy. So take a peek at this free list of interesting companies with past earnings growth (and further growth forecast).

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