Stock pickers are generally looking for stocks that will outperform the broader market. And while active stock picking involves risks (and requires diversification) it can also provide excess returns. For example, the Choo Chiang Holdings Ltd. (Catalist:42E) share price is up 93% in the last 5 years, clearly besting the market return of around 18% (ignoring dividends). However, more recent returns haven’t been as impressive as that, with the stock returning just 15% in the last year, including dividends.

Let’s take a look at the underlying fundamentals over the longer term, and see if they’ve been consistent with shareholders returns.

Our free stock report includes 3 warning signs investors should be aware of before investing in Choo Chiang Holdings. Read for free now.

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. 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 five years of share price growth, Choo Chiang Holdings achieved compound earnings per share (EPS) growth of 19% per year. This EPS growth is higher than the 14% average annual increase in the share price. Therefore, it seems the market has become relatively pessimistic about the company. This cautious sentiment is reflected in its (fairly low) P/E ratio of 6.96.

You can see how EPS has changed over time in the image below (click on the chart to see the exact values).

Dive deeper into Choo Chiang Holdings’ key metrics by checking this interactive graph of Choo Chiang Holdings’s earnings, revenue and cash flow.

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. It’s fair to say that the TSR gives a more complete picture for stocks that pay a dividend. We note that for Choo Chiang Holdings the TSR over the last 5 years was 163%, 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!

Choo Chiang Holdings shareholders are up 15% for the year (even including dividends). But that was short of the market average. On the bright side, the longer term returns (running at about 21% a year, over half a decade) look better. Maybe the share price is just taking a breather while the business executes on its growth strategy. I find it very interesting to look at share price over the long term as a proxy for business performance. But to truly gain insight, we need to consider other information, too. Like risks, for instance. Every company has them, and we’ve spotted 3 warning signs for Choo Chiang Holdings (of which 1 is a bit unpleasant!) you should know about.