When we invest, we're generally looking for stocks that outperform the market average. Buying under-rated businesses is one path to excess returns. For example, the SGSG Science&Technology Co., Ltd. Zhuhai (SZSE:300561) share price is up 44% in the last 5 years, clearly besting the market return of around 35% (ignoring dividends). However, more recent returns haven't been as impressive as that, with the stock returning just 26% in the last year , including dividends .

Since the stock has added CN¥440m to its market cap in the past week alone, let's see if underlying performance has been driving long-term returns.

View our latest analysis for SGSG Science&Technology Zhuhai

Given that SGSG Science&Technology Zhuhai only made minimal earnings in the last twelve months, we'll focus on revenue to gauge its business development. Generally speaking, we'd consider a stock like this alongside loss-making companies, simply because the quantum of the profit is so low. It would be hard to believe in a more profitable future without growing revenues.

In the last 5 years SGSG Science&Technology Zhuhai saw its revenue shrink by 9.9% per year. Despite the lack of revenue growth, the stock has returned a respectable 8%, compound, over that time. To us that suggests that there probably isn't a lot of correlation between the past revenue performance and the share price, but a closer look at analyst forecasts and the bottom line may well explain a lot.

The graphic below depicts how earnings and revenue have changed over time (unveil the exact values by clicking on the image).

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.

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. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. As it happens, SGSG Science&Technology Zhuhai's TSR for the last 5 years was 48%, which exceeds the share price return mentioned earlier. This is largely a result of its dividend payments!

A Different Perspective

It's good to see that SGSG Science&Technology Zhuhai has rewarded shareholders with a total shareholder return of 26% in the last twelve months. And that does include the dividend. That's better than the annualised return of 8% over half a decade, implying that the company is doing better recently. Someone with an optimistic perspective could view the recent improvement in TSR as indicating that the business itself is getting better with time. It's always interesting to track share price performance over the longer term. But to understand SGSG Science&Technology Zhuhai better, we need to consider many other factors. For example, we've discovered 3 warning signs for SGSG Science&Technology Zhuhai (1 is significant!) that you should be aware of before investing here.

But note: SGSG Science&Technology Zhuhai may not be the best stock to buy. So take a peek at this free list of interesting companies with past earnings growth (and further growth forecast).

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