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 NBTM New Materials Group Co., Ltd. (SHSE:600114), which is up 83%, over three years, soundly beating the market decline of 18% (not including dividends). However, more recent returns haven't been as impressive as that, with the stock returning just 57% in the last year , including dividends .

Since the long term performance has been good but there's been a recent pullback of 8.1%, let's check if the fundamentals match the share price.

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.

Over the last three years, NBTM New Materials Group failed to grow earnings per share, which fell 15% (annualized).

This means it's unlikely the market is judging the company based on earnings growth. Given this situation, it makes sense to look at other metrics too.

Languishing at just 0.7%, we doubt the dividend is doing much to prop up the share price. It could be that the revenue growth of 4.0% per year is viewed as evidence that NBTM New Materials Group is growing. In that case, the company may be sacrificing current earnings per share to drive growth, and maybe shareholder's faith in better days ahead will be rewarded.

The graphic below depicts how earnings and revenue have changed over time (unveil the exact values by clicking on the image).

We know that NBTM New Materials Group has improved its bottom line lately, but what does the future have in store? So we recommend checking out this free report showing consensus forecasts

What About Dividends?

As well as measuring the share price return, investors should also consider the total shareholder return (TSR). The TSR incorporates the value of any spin-offs or discounted capital raisings, along with any dividends, based on the assumption that the dividends are reinvested. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. In the case of NBTM New Materials Group, it has a TSR of 90% for the last 3 years. That exceeds its share price return that we previously mentioned. The dividends paid by the company have thusly boosted the total shareholder return.

A Different Perspective

We're pleased to report that NBTM New Materials Group shareholders have received a total shareholder return of 57% over one year. That's including the dividend. That gain is better than the annual TSR over five years, which is 14%. 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 NBTM New Materials Group better, we need to consider many other factors. Consider for instance, the ever-present spectre of investment risk. We've identified 2 warning signs with NBTM New Materials Group (at least 1 which is a bit unpleasant) , and understanding them should be part of your investment process.

If you like to buy stocks alongside management, then you might just love this free list of companies. (Hint: insiders have been buying them).

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