Shenzhen Auto Electric Power PlantLtd (SZSE:002227) swells 13% this week, taking one-year gains to 31%

Passive investing in index funds can generate returns that roughly match the overall market. But you can significantly boost your returns by picking above-average stocks. For example, the Shenzhen Auto Electric Power Plant Co.,Ltd (SZSE:002227) share price is up 31% in the last 1 year, clearly besting the market return of around 16% (not including dividends). So that should have shareholders smiling. In contrast, the longer term returns are negative, since the share price is 15% lower than it was three years ago.

After a strong gain in the past week, it's worth seeing if longer term returns have been driven by improving fundamentals.

View our latest analysis for Shenzhen Auto Electric Power PlantLtd

Shenzhen Auto Electric Power PlantLtd 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. Shareholders of unprofitable companies usually desire strong revenue growth. That's because fast revenue growth can be easily extrapolated to forecast profits, often of considerable size.

Over the last twelve months, Shenzhen Auto Electric Power PlantLtd's revenue grew by 18%. We respect that sort of growth, no doubt. Buyers pushed the share price 31% in response, which isn't unreasonable. If revenue stays on trend, there may be plenty more share price gains to come. But before deciding this growth stock is underappreciated, you might want to check out profitability trends (and cash flow)

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 Shenzhen Auto Electric Power PlantLtd has rewarded shareholders with a total shareholder return of 31% in the last twelve months. Notably the five-year annualised TSR loss of 0.4% per year compares very unfavourably with the recent share price performance. 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 Shenzhen Auto Electric Power PlantLtd better, we need to consider many other factors. Consider for instance, the ever-present spectre of investment risk. We've identified 2 warning signs with Shenzhen Auto Electric Power PlantLtd (at least 1 which is significant) , and understanding them should be part of your investment process.

Of course Shenzhen Auto Electric Power PlantLtd may not be the best stock to buy. So you may wish to see this free collection of growth stocks.

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.