When we invest, we're generally looking for stocks that outperform the market average. And while active stock picking involves risks (and requires diversification) it can also provide excess returns. For example, long term XiaMen HongXin Electron-tech Group Co.,Ltd (SZSE:300657) shareholders have enjoyed a 72% share price rise over the last half decade, well in excess of the market return of around 6.6% (not including dividends). On the other hand, the more recent gains haven't been so impressive, with shareholders gaining just 33%.

Since it's been a strong week for XiaMen HongXin Electron-tech GroupLtd shareholders, let's have a look at trend of the longer term fundamentals.

Because XiaMen HongXin Electron-tech GroupLtd made a loss in the last twelve months, we think the market is probably more focussed on revenue and revenue growth, at least for now. 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.

In the last 5 years XiaMen HongXin Electron-tech GroupLtd saw its revenue grow at 8.2% per year. That's a pretty good long term growth rate. Revenue has been growing at a reasonable clip, so it's debatable whether the share price growth of 12% full reflects the underlying business growth. If revenue growth can maintain for long enough, it's likely profits will flow. There's no doubt that it can be difficult to value pre-profit companies.

The company's revenue and earnings (over time) are depicted in the image below (click to see the exact numbers).

Take a more thorough look at XiaMen HongXin Electron-tech GroupLtd's financial health with this free report on its balance sheet.

A Different Perspective

We're pleased to report that XiaMen HongXin Electron-tech GroupLtd shareholders have received a total shareholder return of 33% over one year. Since the one-year TSR is better than the five-year TSR (the latter coming in at 12% 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. It's always interesting to track share price performance over the longer term. But to understand XiaMen HongXin Electron-tech GroupLtd better, we need to consider many other factors. Consider for instance, the ever-present spectre of investment risk. We've identified 1 warning sign with XiaMen HongXin Electron-tech GroupLtd , and understanding them should be part of your investment process.

For those who like to find winning investments this free list of growing companies with recent insider purchasing, could be just the ticket.

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

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.
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.