Investors ignore increasing losses at Shanghai Xinnanyang Only Education & TechnologyLtd (SHSE:600661) as stock jumps 18% this past week

Passive investing in index funds can generate returns that roughly match the overall market. But investors can boost returns by picking market-beating companies to own shares in. For example, the Shanghai Xinnanyang Only Education & Technology Co.,Ltd (SHSE:600661) share price is up 87% in the last 1 year, clearly besting the market return of around 9.2% (not including dividends). If it can keep that out-performance up over the long term, investors will do very well! And shareholders have also done well over the long term, with an increase of 55% in the last three years.

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 Shanghai Xinnanyang Only Education & TechnologyLtd

Because Shanghai Xinnanyang Only Education & TechnologyLtd made a loss in the last twelve months, we think the market is probably more focussed on revenue and revenue growth, at least for now. 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 year Shanghai Xinnanyang Only Education & TechnologyLtd saw its revenue grow by 37%. That's a fairly respectable growth rate. Buyers pushed the share price 87% in response, which isn't unreasonable. If the company can maintain the revenue growth, the share price could go higher still. But it's crucial to check profitability and cash flow before forming a view on the future.

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

If you are thinking of buying or selling Shanghai Xinnanyang Only Education & TechnologyLtd stock, you should check out this FREE detailed report on its balance sheet.

A Different Perspective

It's nice to see that Shanghai Xinnanyang Only Education & TechnologyLtd shareholders have received a total shareholder return of 87% over the last year. Notably the five-year annualised TSR loss of 3% per year compares very unfavourably with the recent share price performance. We generally put more weight on the long term performance over the short term, but the recent improvement could hint at a (positive) inflection point within the business. 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 1 warning sign for Shanghai Xinnanyang Only Education & TechnologyLtd you should know about.

We will like Shanghai Xinnanyang Only Education & TechnologyLtd 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.