These days it's easy to simply buy an index fund, and your returns should (roughly) match the market. But one can do better than that by picking better than average stocks (as part of a diversified portfolio). To wit, the Zhongtai Futures Company Limited (HKG:1461) share price is 59% higher than it was a year ago, much better than the market return of around 30% (not including dividends) in the same period. That's a solid performance by our standards! The longer term returns have not been as good, with the stock price only 2.6% higher than it was three years ago.

Since the stock has added HK$150m to its market cap in the past week alone, let's see if underlying performance has been driving long-term returns.

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While markets are a powerful pricing mechanism, share prices reflect investor sentiment, not just underlying business performance. By comparing earnings per share (EPS) and share price changes over time, we can get a feel for how investor attitudes to a company have morphed over time.

During the last year, Zhongtai Futures actually saw its earnings per share drop 97%. We do note that there were extraordinary items impacting the result.

Given the share price gain, we doubt the market is measuring progress with EPS. Therefore, it seems likely that investors are putting more weight on metrics other than EPS, at the moment.

Unfortunately Zhongtai Futures' fell 14% over twelve months. So using a snapshot of key business metrics doesn't give us a good picture of why the market is bidding up the stock.

The image below shows how earnings and revenue have tracked over time (if you click on the image you can see greater detail).

If you are thinking of buying or selling Zhongtai Futures stock, you should check out this FREE detailed report on its balance sheet.

A Different Perspective

It's nice to see that Zhongtai Futures shareholders have received a total shareholder return of 59% over the last year. Since the one-year TSR is better than the five-year TSR (the latter coming in at 5% per year), it would seem that the stock's performance has improved in recent times. 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 Zhongtai Futures better, we need to consider many other factors. Even so, be aware that Zhongtai Futures is showing 3 warning signs in our investment analysis , you should know about...

We will like Zhongtai Futures better if we see some big insider buys. While we wait, check out this free list of undervalued stocks (mostly small caps) with considerable, recent, 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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.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.