Generally speaking, investors are inspired to be stock pickers by the potential to find the big winners. Mistakes are inevitable, but a single top stock pick can cover any losses, and so much more. One bright shining star stock has been Shenzhen China Bicycle Company (Holdings) Limited (SZSE:000017), which is 309% higher than three years ago. Also pleasing for shareholders was the 139% gain in the last three months.
While the stock has fallen 8.1% this week, it's worth focusing on the longer term and seeing if the stocks historical returns have been driven by the underlying fundamentals.
Shenzhen China Bicycle Company (Holdings) 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. Generally speaking, companies without profits are expected to grow revenue every year, and at a good clip. That's because fast revenue growth can be easily extrapolated to forecast profits, often of considerable size.
Shenzhen China Bicycle Company (Holdings)'s revenue trended up 68% each year over three years. That's much better than most loss-making companies. And it's not just the revenue that is taking off. The share price is up 60% per year in that time. It's always tempting to take profits after a share price gain like that, but high-growth companies like Shenzhen China Bicycle Company (Holdings) can sometimes sustain strong growth for many years. In fact, it might be time to put it on your watchlist, if you're not already familiar with the stock.
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 Shenzhen China Bicycle Company (Holdings)'s financial health with this free report on its balance sheet.
A Different Perspective
It's nice to see that Shenzhen China Bicycle Company (Holdings) shareholders have received a total shareholder return of 123% over the last year. Since the one-year TSR is better than the five-year TSR (the latter coming in at 17% per year), it would seem that the stock's performance has improved in recent times. 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. For example, we've discovered 2 warning signs for Shenzhen China Bicycle Company (Holdings) that you should be aware of before investing here.
Of course, you might find a fantastic investment by looking elsewhere. So take a peek at this free list of companies we expect will grow earnings.
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.