Optimism for Tibet TourismLtd (SHSE:600749) has grown this past week, despite three-year decline in earnings

By buying an index fund, investors can approximate the average market return. But if you choose individual stocks with prowess, you can make superior returns. For example, the Tibet Tourism Co.,Ltd (SHSE:600749) share price is up 19% in the last three years, clearly besting the market decline of around 31% (not including dividends).

Since the stock has added CN¥271m to its market cap in the past week alone, let's see if underlying performance has been driving long-term returns.

View our latest analysis for Tibet TourismLtd

Given that Tibet TourismLtd only made minimal earnings in the last twelve months, we'll focus on revenue to gauge its business development. Generally speaking, we'd consider a stock like this alongside loss-making companies, simply because the quantum of the profit is so low. It would be hard to believe in a more profitable future without growing revenues.

Tibet TourismLtd's revenue trended up 7.8% each year over three years. Considering the company is losing money, we think that rate of revenue growth is uninspiring. The modest growth is probably broadly reflected in the share price, which is up 6%, per year over 3 years. The real question is when the business will generate profits, and how quickly they will grow. In this sort of situation it can be worth putting the stock on your watchlist. If it can become profitable, then even moderate revenue growth could grow profits quickly.

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 Tibet TourismLtd stock, you should check out this FREE detailed report on its balance sheet.

A Different Perspective

While it's never nice to take a loss, Tibet TourismLtd shareholders can take comfort that their trailing twelve month loss of 6.7% wasn't as bad as the market loss of around 14%. Longer term investors wouldn't be so upset, since they would have made 0.8%, each year, over five years. In the best case scenario the last year is just a temporary blip on the journey to 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. Case in point: We've spotted 2 warning signs for Tibet TourismLtd you should be aware of.

We will like Tibet TourismLtd 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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com