Despite the downward trend in Zhejiang Huace Film & TV’s (SZSE:300133) earnings, the stock is up 14%, representing a one-year gain of 40%.

Passive investing in index funds can generate returns that are roughly in line with the overall market. But you can do even better by picking better-than-average stocks (as part of a diversified portfolio). Namely that one Zhejiang Huace Film & TV Co., Ltd. (SZSE:300133) The share price is 40% higher than a year ago, much better than the market return of around 4.6% (excluding dividends) over the same period. This is a solid achievement for us! However, the longer-term returns aren’t as impressive, with the stock only up 30% in three years.

Since the stock has increased its market cap by CN¥1.6 billion in the last week alone, let’s see if the underlying performance has translated into long-term returns.

Check out our latest analysis for Zhejiang Huace Film & TV

There is no denying that markets are sometimes efficient, but prices do not always reflect underlying business performance. One imperfect but simple way to consider how the market perception of a company has shifted is to compare the change in earnings per share (EPS) with the share price movement.

Over the last year, Zhejiang Huace Film & TV actually saw its earnings per share fall by 46%.

Therefore, we don’t think investors pay too much attention to EPS. Therefore, it is likely that investors are currently placing more weight on metrics other than earnings per share.

We doubt that the modest 0.6% dividend yield will provide any real support for the share price. Unfortunately, Zhejiang Huace Film & TVs fell 38% in twelve months. The fundamental key figures therefore do not provide a clear explanation for the share price increase.

The company’s earnings and revenue (over time) are depicted in the image below (click to see the exact numbers).

The free Zhejiang Huace Film & TV’s interactive balance sheet strength report is a good place to start if you want to investigate the stock further.

A different perspective

It’s good to see that Zhejiang Huace Film & TV has rewarded shareholders with a total return of 40% over the last twelve months. Of course, this also includes the dividend. That’s better than its annual return of 1.6% over half a decade, meaning the company has been doing better recently. As share price momentum remains strong, it might be worth taking a closer look at the stock so you don’t miss out on an opportunity. I find it very interesting to look at the share price as an indicator of business development in the long term. But to gain real insight, we need to consider other information too. For example, consider risks. Every company has them, and we discovered them 2 warning signs for Zhejiang Huace Film & TV you should know that.

But note: Zhejiang Huace Film & TV may not be the best stock to buy. So take a look free List of interesting companies with past earnings growth (and further growth forecast).

Please note that 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 from Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts using only an unbiased methodology and our articles are not intended as financial advice. It does not constitute a recommendation to buy or sell any stock and does not take into account your objectives or financial situation. Our goal is to provide you with long-term focused analysis based on fundamental data. Note that our analysis may not reflect the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.