Zhejiang Yueling (SZSE:002725) swells 13% this week, taking five-year gains to 45%

Generally speaking the aim of active stock picking is to find companies that provide returns that are superior to the market average. And in our experience, buying the right stocks can give your wealth a significant boost. For example, the Zhejiang Yueling Co., Ltd. (SZSE:002725) share price is up 43% in the last 5 years, clearly besting the market return of around 19% (ignoring dividends). On the other hand, the more recent gains haven't been so impressive, with shareholders gaining just 24%.

The past week has proven to be lucrative for Zhejiang Yueling investors, so let's see if fundamentals drove the company's five-year performance.

See our latest analysis for Zhejiang Yueling

Because Zhejiang Yueling 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. Shareholders of unprofitable companies usually desire strong revenue growth. As you can imagine, fast revenue growth, when maintained, often leads to fast profit growth.

In the last 5 years Zhejiang Yueling saw its revenue shrink by 1.8% per year. Despite the lack of revenue growth, the stock has returned a respectable 7%, compound, over that time. It's probably worth checking other factors such as the profitability, to try to understand the share price action. It may not be reflecting the revenue.

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

If you are thinking of buying or selling Zhejiang Yueling stock, you should check out this FREE detailed report on its balance sheet.

A Different Perspective

We're pleased to report that Zhejiang Yueling shareholders have received a total shareholder return of 24% over one year. 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. In the best case scenario, this may hint at some real business momentum, implying that now could be a great time to delve deeper. 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. To that end, you should learn about the 2 warning signs we've spotted with Zhejiang Yueling (including 1 which can't be ignored) .

If you would prefer to check out another company -- one with potentially superior financials -- then do not miss this free list of companies that have proven they can 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.