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. For example, Shanghai Yanhua Smartech Group Co., Ltd. (SZSE:002178) shareholders have seen the share price rise 89% over three years, well in excess of the market decline (23%, not including dividends). However, more recent returns haven't been as impressive as that, with the stock returning just 25% in the last year.

Since it's been a strong week for Shanghai Yanhua Smartech Group shareholders, let's have a look at trend of the longer term fundamentals.

View our latest analysis for Shanghai Yanhua Smartech Group

Shanghai Yanhua Smartech Group wasn't profitable in the last twelve months, it is unlikely we'll see a strong correlation between its share price and its earnings per share (EPS). Arguably revenue is our next best option. Shareholders of unprofitable companies usually expect strong revenue growth. That's because fast revenue growth can be easily extrapolated to forecast profits, often of considerable size.

Shanghai Yanhua Smartech Group actually saw its revenue drop by 2.5% per year over three years. Despite the lack of revenue growth, the stock has returned 24%, compound, over three years. Unless the company is going to make profits soon, we would be pretty cautious about it.

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

Take a more thorough look at Shanghai Yanhua Smartech Group's financial health with this free report on its balance sheet.

A Different Perspective

It's good to see that Shanghai Yanhua Smartech Group has rewarded shareholders with a total shareholder return of 25% in the last twelve months. That gain is better than the annual TSR over five years, which is 8%. Therefore it seems like sentiment around the company has been positive lately. Someone with an optimistic perspective could view the recent improvement in TSR as indicating that the business itself is getting better with time. I find it very interesting to look at share price over the long term as a proxy for business performance. But to truly gain insight, we need to consider other information, too. Consider for instance, the ever-present spectre of investment risk. We've identified 1 warning sign with Shanghai Yanhua Smartech Group , 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 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.