Investing in Jiangsu Lihua Animal Husbandry (SZSE:300761) three years ago would have delivered you a 52% gain

One simple way to benefit from the stock market is to buy an index fund. But if you pick the right individual stocks, you could make more than that. Just take a look at Jiangsu Lihua Animal Husbandry Co., Ltd. (SZSE:300761), which is up 48%, over three years, soundly beating the market decline of 29% (not including dividends). On the other hand, the returns haven't been quite so good recently, with shareholders up just 21%.

So let's investigate and see if the longer term performance of the company has been in line with the underlying business' progress.

View our latest analysis for Jiangsu Lihua Animal Husbandry

While Jiangsu Lihua Animal Husbandry 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. It would be hard to believe in a more profitable future without growing revenues.

In the last 3 years Jiangsu Lihua Animal Husbandry saw its revenue grow at 17% per year. That's a very respectable growth rate. The share price gain of 14% per year shows that the market is paying attention to this growth. Of course, valuation is quite sensitive to the rate of growth. Keep in mind that the strength of the balance sheet impacts the options open to the company.

The graphic below depicts how earnings and revenue have changed over time (unveil the exact values by clicking on the image).

This free interactive report on Jiangsu Lihua Animal Husbandry's balance sheet strength is a great place to start, if you want to investigate the stock further.

What About The Total Shareholder Return (TSR)?

We'd be remiss not to mention the difference between Jiangsu Lihua Animal Husbandry's total shareholder return (TSR) and its share price return. The TSR is a return calculation that accounts for the value of cash dividends (assuming that any dividend received was reinvested) and the calculated value of any discounted capital raisings and spin-offs. Its history of dividend payouts mean that Jiangsu Lihua Animal Husbandry's TSR of 52% over the last 3 years is better than the share price return.

A Different Perspective

It's good to see that Jiangsu Lihua Animal Husbandry has rewarded shareholders with a total shareholder return of 21% in the last twelve months. Notably the five-year annualised TSR loss of 6% 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. Case in point: We've spotted 2 warning signs for Jiangsu Lihua Animal Husbandry you should be aware of.

If you would prefer to check out another company -- one with potentially superior financials -- then do not miss this free list of companies that have proven they can grow earnings.

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