Generally speaking the aim of active stock picking is to find companies that provide returns that are superior to the market average. Buying under-rated businesses is one path to excess returns. For example, long term CCCG Real Estate Company Limited (SZSE:000736) shareholders have enjoyed a 63% share price rise over the last half decade, well in excess of the market return of around 14% (not including dividends).

Since the stock has added CN¥431m to its market cap in the past week alone, let's see if underlying performance has been driving long-term returns.

Because CCCG Real Estate 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. When a company doesn't make profits, we'd generally hope to see good revenue growth. That's because fast revenue growth can be easily extrapolated to forecast profits, often of considerable size.

For the last half decade, CCCG Real Estate can boast revenue growth at a rate of 29% per year. That's well above most pre-profit companies. It's good to see that the stock has 10%, but not entirely surprising given revenue shows strong growth. If the strong revenue growth continues, we'd hope to see the share price to follow, in time. Opportunity lies where the market hasn't fully priced growth in the underlying business.

You can see how earnings and revenue have changed over time in the image below (click on the chart to see the exact values).

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 The Total Shareholder Return (TSR)?

Investors should note that there's a difference between CCCG Real Estate's total shareholder return (TSR) and its share price change, which we've covered above. The TSR attempts to capture the value of dividends (as if they were reinvested) as well as any spin-offs or discounted capital raisings offered to shareholders. Its history of dividend payouts mean that CCCG Real Estate's TSR of 71% over the last 5 years is better than the share price return.

A Different Perspective

While the broader market lost about 8.0% in the twelve months, CCCG Real Estate shareholders did even worse, losing 24%. Having said that, it's inevitable that some stocks will be oversold in a falling market. The key is to keep your eyes on the fundamental developments. Longer term investors wouldn't be so upset, since they would have made 11%, each year, over five years. If the fundamental data continues to indicate long term sustainable growth, the current sell-off could be an opportunity worth considering. It's always interesting to track share price performance over the longer term. But to understand CCCG Real Estate better, we need to consider many other factors. Case in point: We've spotted 2 warning signs for CCCG Real Estate you should be aware of.

But note: CCCG Real Estate 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.