Despite shrinking by CN¥386m in the past week, Fujian Nebula Electronics (SZSE:300648) shareholders are still up 74% over 5 years

Stock pickers are generally looking for stocks that will outperform the broader market. And the truth is, you can make significant gains if you buy good quality businesses at the right price. For example, the Fujian Nebula Electronics Co., Ltd. (SZSE:300648) share price is up 73% in the last 5 years, clearly besting the market return of around 17% (ignoring dividends).

In light of the stock dropping 9.1% in the past week, we want to investigate the longer term story, and see if fundamentals have been the driver of the company's positive five-year return.

See our latest analysis for Fujian Nebula Electronics

Fujian Nebula Electronics 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. When a company doesn't make profits, we'd generally hope to see good revenue growth. Some companies are willing to postpone profitability to grow revenue faster, but in that case one would hope for good top-line growth to make up for the lack of earnings.

For the last half decade, Fujian Nebula Electronics can boast revenue growth at a rate of 21% per year. Even measured against other revenue-focussed companies, that's a good result. It's good to see that the stock has 12%, 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.

The company's revenue and earnings (over time) are depicted in the image below (click to see the exact numbers).

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

Investors in Fujian Nebula Electronics had a tough year, with a total loss of 8.5%, against a market gain of about 4.2%. Even the share prices of good stocks drop sometimes, but we want to see improvements in the fundamental metrics of a business, before getting too interested. On the bright side, long term shareholders have made money, with a gain of 12% per year over half a decade. If the fundamental data continues to indicate long term sustainable growth, the current sell-off could be an opportunity worth considering. 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. Take risks, for example - Fujian Nebula Electronics has 3 warning signs (and 1 which doesn't sit too well with us) we think you should know about.

We will like Fujian Nebula Electronics 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.