The 11% return this week takes Guangdong Quanwei TechnologyLtd's (SZSE:300716) shareholders one-year gains to 118%

When you buy shares in a company, there is always a risk that the price drops to zero. But if you pick the right business to buy shares in, you can make more than you can lose. For example, the Guangdong Quanwei Technology Co.,Ltd. (SZSE:300716) share price had more than doubled in just one year - up 118%. Better yet, the share price has risen 11% in the last week. It is also impressive that the stock is up 32% over three years, adding to the sense that it is a real winner.

Since the stock has added CN¥190m to its market cap in the past week alone, let's see if underlying performance has been driving long-term returns.

See our latest analysis for Guangdong Quanwei TechnologyLtd

Because Guangdong Quanwei 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. 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.

Guangdong Quanwei TechnologyLtd actually shrunk its revenue over the last year, with a reduction of 59%. So we would not have expected the share price to rise 118%. This is a good example of how buyers can push up prices even before the fundamental metrics show much growth. It's quite likely the revenue fall was already priced in, anyway.

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

Balance sheet strength is crucial. It might be well worthwhile taking a look at our free report on how its financial position has changed over time.

A Different Perspective

It's good to see that Guangdong Quanwei TechnologyLtd has rewarded shareholders with a total shareholder return of 118% in the last twelve months. Since the one-year TSR is better than the five-year TSR (the latter coming in at 6% per year), it would seem that the stock's performance has improved in recent times. Someone with an optimistic perspective could view the recent improvement in TSR as indicating that the business itself is getting better with time. I find it very interesting to look at share price over the long term as a proxy for business performance. But to truly gain insight, we need to consider other information, too. For example, we've discovered 3 warning signs for Guangdong Quanwei TechnologyLtd that you should be aware of before investing here.

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.