Hunan Huamin Holdings (SZSE:300345) rallies 18% this week, taking three-year gains to 49%

By buying an index fund, you can roughly match the market return with ease. But if you buy good businesses at attractive prices, your portfolio returns could exceed the average market return. Just take a look at Hunan Huamin Holdings Co., Ltd. (SZSE:300345), which is up 49%, over three years, soundly beating the market decline of 25% (not including dividends).

Since the stock has added CN¥682m to its market cap in the past week alone, let's see if underlying performance has been driving long-term returns.

Check out our latest analysis for Hunan Huamin Holdings

Hunan Huamin Holdings isn't currently profitable, so most analysts would look to revenue growth to get an idea of how fast the underlying business is growing. Shareholders of unprofitable companies usually desire strong revenue growth. That's because it's hard to be confident a company will be sustainable if revenue growth is negligible, and it never makes a profit.

Hunan Huamin Holdings' revenue trended up 80% each year over three years. That's much better than most loss-making companies. While the compound gain of 14% per year over three years is pretty good, you might argue it doesn't fully reflect the strong revenue growth. So now might be the perfect time to put Hunan Huamin Holdings on your radar. If the company is trending towards profitability then it could be very interesting.

You can see below how earnings and revenue have changed over time (discover the exact values by clicking on the image).

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

While the broader market lost about 6.0% in the twelve months, Hunan Huamin Holdings shareholders did even worse, losing 14%. However, it could simply be that the share price has been impacted by broader market jitters. It might be worth keeping an eye on the fundamentals, in case there's a good opportunity. Regrettably, last year's performance caps off a bad run, with the shareholders facing a total loss of 2% per year over five years. Generally speaking long term share price weakness can be a bad sign, though contrarian investors might want to research the stock in hope of a turnaround. It's always interesting to track share price performance over the longer term. But to understand Hunan Huamin Holdings better, we need to consider many other factors. For example, we've discovered 3 warning signs for Hunan Huamin Holdings (2 are a bit unpleasant!) that you should be aware of before investing here.

We will like Hunan Huamin Holdings better if we see some big insider buys. While we wait, check out this free list of undervalued stocks (mostly small caps) with considerable, recent, insider buying.

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.