Despite the downward trend in earnings at Zhejiang Dafeng Industry (SHSE:603081) the stock ascends 9.8%, bringing one-year gains to 46%

The simplest way to invest in stocks is to buy exchange traded funds. But one can do better than that by picking better than average stocks (as part of a diversified portfolio). To wit, the Zhejiang Dafeng Industry Co., Ltd (SHSE:603081) share price is 45% higher than it was a year ago, much better than the market return of around 20% (not including dividends) in the same period. That's a solid performance by our standards! In contrast, the longer term returns are negative, since the share price is 0.8% lower than it was three years ago.

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

Check out our latest analysis for Zhejiang Dafeng Industry

While Zhejiang Dafeng Industry made a small profit, in the last year, we think that the market is probably more focussed on the top line growth at the moment. As a general rule, we think this kind of company is more comparable to loss-making stocks, since the actual profit is so low. For shareholders to have confidence a company will grow profits significantly, it must grow revenue.

In the last year Zhejiang Dafeng Industry saw its revenue shrink by 49%. The stock is up 45% in that time, a fine performance given the revenue drop. We can correlate the share price rise with revenue or profit growth, but it seems the market had previously expected weaker results, and sentiment around the stock is improving.

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

Take a more thorough look at Zhejiang Dafeng Industry's financial health with this free report on its balance sheet.

A Different Perspective

It's nice to see that Zhejiang Dafeng Industry shareholders have received a total shareholder return of 46% over the last year. And that does include the dividend. That's better than the annualised return of 0.3% over half a decade, implying that the company is doing better recently. In the best case scenario, this may hint at some real business momentum, implying that now could be a great time to delve deeper. 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. Like risks, for instance. Every company has them, and we've spotted 4 warning signs for Zhejiang Dafeng Industry (of which 2 shouldn't be ignored!) you should know about.

But note: Zhejiang Dafeng Industry may not be the best stock to buy. So take a peek at this free list of interesting companies with past earnings growth (and further growth forecast).

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.