By buying an index fund, you can roughly match the market return with ease. But if you pick the right individual stocks, you could make more than that. For example, Shanghai Sunglow Packaging Technology Co.,Ltd (SHSE:603499) shareholders have seen the share price rise 66% over three years, well in excess of the market decline (22%, not including dividends). However, more recent returns haven't been as impressive as that, with the stock returning just 35% in the last year , including dividends .
Since the stock has added CN¥366m to its market cap in the past week alone, let's see if underlying performance has been driving long-term returns.
While Shanghai Sunglow Packaging TechnologyLtd 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.
Shanghai Sunglow Packaging TechnologyLtd's revenue trended up 13% each year over three years. That's a very respectable growth rate. The share price gain of 18% per year shows that the market is paying attention to this growth. If that's the case, then it could be well worth while to research the growth trajectory. Of course, it's always worth considering funding risks when a company isn't profitable.
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
It's good to see that Shanghai Sunglow Packaging TechnologyLtd has rewarded shareholders with a total shareholder return of 35% in the last twelve months. And that does include the dividend. That certainly beats the loss of about 1.8% per year over the last half decade. We generally put more weight on the long term performance over the short term, but the recent improvement could hint at a (positive) inflection point within the business. It's always interesting to track share price performance over the longer term. But to understand Shanghai Sunglow Packaging TechnologyLtd better, we need to consider many other factors. For example, we've discovered 3 warning signs for Shanghai Sunglow Packaging TechnologyLtd (1 is significant!) 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.