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By buying an index fund, you can roughly match the market return with ease. But if you choose individual stocks with prowess, you can make superior returns. Just take a look at Lung Kee (Bermuda) Holdings Limited (HKG:255), which is up 62%, over three years, soundly beating the market return of 18% (not including dividends).

View our latest analysis for Lung Kee (Bermuda) Holdings

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 imperfect but simple way to consider how the market perception of a company has shifted is to compare the change in the earnings per share (EPS) with the share price movement.

During three years of share price growth, Lung Kee (Bermuda) Holdings achieved compound earnings per share growth of 11% per year. This EPS growth is lower than the 17% average annual increase in the share price. So it's fair to assume the market has a higher opinion of the business than it did three years ago. It is quite common to see investors become enamoured with a business, after a few years of solid progress.

The graphic below depicts how EPS has changed over time (unveil the exact values by clicking on the image).

It might be well worthwhile taking a look at our free report on Lung Kee (Bermuda) Holdings's earnings, revenue and cash flow.

What About Dividends?

As well as measuring the share price return, investors should also consider the total shareholder return (TSR). Whereas the share price return only reflects the change in the share price, the TSR includes the value of dividends (assuming they were reinvested) and the benefit of any discounted capital raising or spin-off. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. In the case of Lung Kee (Bermuda) Holdings, it has a TSR of 112% for the last 3 years. That exceeds its share price return that we previously mentioned. This is largely a result of its dividend payments!

A Different Perspective

Lung Kee (Bermuda) Holdings shareholders are down 13% over twelve months (even including dividends), which isn't far from the market return of -13%. The silver lining is that longer term investors would have made a total return of 12% per year over half a decade. If the stock price has been impacted by changing sentiment, rather than deteriorating business conditions, it could spell opportunity. If you would like to research Lung Kee (Bermuda) Holdings in more detail then you might want to take a look at whether insiders have been buying or selling shares in the company.