Sinopec Oilfield Service's (HKG:1033) 24% return outpaced the company's earnings growth over the same one-year period

Diversification is a key tool for dealing with stock price volatility. Of course, in an ideal world, all your stocks would beat the market. Sinopec Oilfield Service Corporation (HKG:1033) has done well over the last year, with the stock price up 24% beating the market return of 21% (not including dividends). In contrast, the longer term returns are negative, since the share price is 6.3% lower than it was three years ago.

The past week has proven to be lucrative for Sinopec Oilfield Service investors, so let's see if fundamentals drove the company's one-year performance.

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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.

Sinopec Oilfield Service was able to grow EPS by 7.2% in the last twelve months. This EPS growth is significantly lower than the 24% increase in the share price. So it's fair to assume the market has a higher opinion of the business than it a year ago.

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

It is of course excellent to see how Sinopec Oilfield Service has grown profits over the years, but the future is more important for shareholders. If you are thinking of buying or selling Sinopec Oilfield Service stock, you should check out this FREE detailed report on its balance sheet.

A Different Perspective

Sinopec Oilfield Service provided a TSR of 24% over the last twelve months. Unfortunately this falls short of the market return. On the bright side, that's still a gain, and it's actually better than the average return of 1.8% over half a decade This suggests the company might be improving over time. While it is well worth considering the different impacts that market conditions can have on the share price, there are other factors that are even more important. Consider for instance, the ever-present spectre of investment risk. We've identified 1 warning sign with Sinopec Oilfield Service , and understanding them should be part of your investment process.

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Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on Hong Kong exchanges.

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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.