By buying an index fund, investors can approximate the average market return. But if you choose individual stocks with prowess, you can make superior returns. For example, the Weihai Huadong Automation Co., Ltd (SZSE:002248) share price is up 40% in the last three years, clearly besting the market return of around 16% (not including dividends). On the other hand, the returns haven't been quite so good recently, with shareholders up just 2.5%.

Since it's been a strong week for Weihai Huadong Automation shareholders, let's have a look at trend of the longer term fundamentals.

View our latest analysis for Weihai Huadong Automation

While Weihai Huadong Automation made a small profit, in the last year, we think that the market is probably more focussed on the top line growth at the moment. As a general rule, we think this kind of company is more comparable to loss-making stocks, since the actual profit is so low. It would be hard to believe in a more profitable future without growing revenues.

In the last 3 years Weihai Huadong Automation saw its revenue grow at 25% per year. That's much better than most loss-making companies. The share price rise of 12% per year throughout that time is nice to see, and given the revenue growth, that gain seems somewhat justified. If that's the case, now might be the time to take a close look at Weihai Huadong Automation. If the company is trending towards profitability then it could be very interesting.

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

Balance sheet strength is crucial. It might be well worthwhile taking a look at our free report on how its financial position has changed over time.

A Different Perspective

We're pleased to report that Weihai Huadong Automation shareholders have received a total shareholder return of 2.5% over one year. Having said that, the five-year TSR of 7% a year, is even better. Potential buyers might understandably feel they've missed the opportunity, but it's always possible business is still firing on all cylinders. It's always interesting to track share price performance over the longer term. But to understand Weihai Huadong Automation better, we need to consider many other factors. Consider for instance, the ever-present spectre of investment risk. We've identified 3 warning signs with Weihai Huadong Automation , and understanding them should be part of your investment process.

If you like to buy stocks alongside management, then you might just love this free list of companies. (Hint: insiders have been buying them).

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