While shareholders of Shandong Hontron Aluminum Industry Holding (SZSE:002379) are in the black over 5 years, those who bought a week ago aren't so fortunate

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. To wit, the Shandong Hontron Aluminum Industry Holding share price has climbed 79% in five years, easily topping the market return of 3.3% (ignoring dividends). On the other hand, the more recent gains haven't been so impressive, with shareholders gaining just 34%.

While this past week has detracted from the company's five-year return, let's look at the recent trends of the underlying business and see if the gains have been in alignment.

Check out our latest analysis for Shandong Hontron Aluminum Industry Holding

Shandong Hontron Aluminum Industry Holding wasn't profitable in the last twelve months, it is unlikely we'll see a strong correlation between its share price and its earnings per share (EPS). Arguably revenue is our next best option. When a company doesn't make profits, we'd generally hope to see good revenue growth. As you can imagine, fast revenue growth, when maintained, often leads to fast profit growth.

For the last half decade, Shandong Hontron Aluminum Industry Holding can boast revenue growth at a rate of 6.2% per year. That's a fairly respectable growth rate. Revenue has been growing at a reasonable clip, so it's debatable whether the share price growth of 12% full reflects the underlying business growth. The key question is whether revenue growth will slow down, and if so, how quickly. Lack of earnings means you have to project further into the future justify the valuation on the basis of future free cash flow.

You can see how earnings and revenue have changed over time in the image below (click on the chart to see the exact values).

You can see how its balance sheet has strengthened (or weakened) over time in this free interactive graphic.

A Different Perspective

We're pleased to report that Shandong Hontron Aluminum Industry Holding shareholders have received a total shareholder return of 34% over one year. That's better than the annualised return of 12% over half a decade, implying that the company is doing better recently. Given the share price momentum remains strong, it might be worth taking a closer look at the stock, lest you miss an opportunity. 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 Shandong Hontron Aluminum Industry Holding you should be aware of, and 1 of them shouldn't be ignored.

But note: Shandong Hontron Aluminum Industry Holding 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.

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