The 9.2% return this week takes Xi'an Tianhe Defense Technology's (SZSE:300397) shareholders one-year gains to 63%

Passive investing in index funds can generate returns that roughly match the overall market. But if you pick the right individual stocks, you could make more than that. For example, the Xi'an Tianhe Defense Technology Co., Ltd. (SZSE:300397) share price is up 63% in the last 1 year, clearly besting the market return of around 14% (not including dividends). That's a solid performance by our standards! Having said that, the longer term returns aren't so impressive, with stock gaining just 5.2% in three years.

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

Check out our latest analysis for Xi'an Tianhe Defense Technology

Xi'an Tianhe Defense Technology isn't currently profitable, so most analysts would look to revenue growth to get an idea of how fast the underlying business is growing. Generally speaking, companies without profits are expected to grow revenue every year, and at a good clip. As you can imagine, fast revenue growth, when maintained, often leads to fast profit growth.

Xi'an Tianhe Defense Technology actually shrunk its revenue over the last year, with a reduction of 14%. Despite the lack of revenue growth, the stock has returned a solid 63% the last twelve months. To us that means that there isn't a lot of correlation between the past revenue performance and the share price, but a closer look at analyst forecasts and the bottom line may well explain a lot.

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

We're pleased to report that the CEO is remunerated more modestly than most CEOs at similarly capitalized companies. It's always worth keeping an eye on CEO pay, but a more important question is whether the company will grow earnings throughout the years. It might be well worthwhile taking a look at our free report on Xi'an Tianhe Defense Technology's earnings, revenue and cash flow.

A Different Perspective

We're pleased to report that Xi'an Tianhe Defense Technology shareholders have received a total shareholder return of 63% over one year. There's no doubt those recent returns are much better than the TSR loss of 7% per year over five years. The long term loss makes us cautious, but the short term TSR gain certainly hints at a brighter future. While it is well worth considering the different impacts that market conditions can have on the share price, there are other factors that are even more important. Consider risks, for instance. Every company has them, and we've spotted 2 warning signs for Xi'an Tianhe Defense Technology you should know about.

Of course Xi'an Tianhe Defense Technology 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.