If you want to compound wealth in the stock market, you can do so by buying an index fund. But if you pick the right individual stocks, you could make more than that. For example, the WH Group Limited (HKG:288) share price is up 58% in the last 1 year, clearly besting the market return of around 43% (not including dividends). That's a solid performance by our standards! It is also impressive that the stock is up 37% over three years, adding to the sense that it is a real winner.

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

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There is no denying that markets are sometimes efficient, but prices do not always reflect underlying business performance. One way to examine how market sentiment has changed over time is to look at the interaction between a company's share price and its earnings per share (EPS).

WH Group was able to grow EPS by 156% in the last twelve months. It's fair to say that the share price gain of 58% did not keep pace with the EPS growth. Therefore, it seems the market isn't as excited about WH Group as it was before. This could be an opportunity. This cautious sentiment is reflected in its (fairly low) P/E ratio of 8.08.

The image below shows how EPS has tracked over time (if you click on the image you can see greater detail).

We know that WH Group has improved its bottom line lately, but is it going to grow revenue? This free report showing analyst revenue forecasts should help you figure out if the EPS growth can be sustained.

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 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 WH Group, it has a TSR of 76% for the last 1 year. 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 WH Group shareholders have received a total shareholder return of 76% over one year. That's including the dividend. That gain is better than the annual TSR over five years, which is 9%. 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 WH Group better, we need to consider many other factors. Take risks, for example - WH Group has 2 warning signs (and 1 which is potentially serious) we think you should know about.

We will like WH Group 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.