The 13% return this week takes Guangzhou Echom Sci.&Tech.Co.Ltd's (SZSE:002420) shareholders five-year gains to 64%

When we invest, we're generally looking for stocks that outperform the market average. And while active stock picking involves risks (and requires diversification) it can also provide excess returns. For example, long term Guangzhou Echom Sci.&Tech.Co.,Ltd (SZSE:002420) shareholders have enjoyed a 64% share price rise over the last half decade, well in excess of the market return of around 7.8% (not including dividends).

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 Guangzhou Echom Sci.&Tech.Co.Ltd

Guangzhou Echom Sci.&Tech.Co.Ltd 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 fast revenue growth can be easily extrapolated to forecast profits, often of considerable size.

In the last 5 years Guangzhou Echom Sci.&Tech.Co.Ltd saw its revenue shrink by 9.4% per year. Despite the lack of revenue growth, the stock has returned a respectable 10%, compound, over that time. It's probably worth checking other factors such as the profitability, to try to understand the share price action. It may not be reflecting the revenue.

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 Guangzhou Echom Sci.&Tech.Co.Ltd's financial health with this free report on its balance sheet.

A Different Perspective

We regret to report that Guangzhou Echom Sci.&Tech.Co.Ltd shareholders are down 6.6% for the year. Unfortunately, that's worse than the broader market decline of 6.0%. Having said that, it's inevitable that some stocks will be oversold in a falling market. The key is to keep your eyes on the fundamental developments. On the bright side, long term shareholders have made money, with a gain of 10% per year over half a decade. It could be that the recent sell-off is an opportunity, so it may be worth checking the fundamental data for signs of a long term growth trend. You could get a better understanding of Guangzhou Echom Sci.&Tech.Co.Ltd's growth by checking out this more detailed historical graph of earnings, revenue and cash flow.

If you are like me, then you will not want to miss this free list of undervalued small caps that insiders are 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.