Investors bid Shenzhen Bingchuan NetworkLtd (SZSE:300533) up CN¥377m despite increasing losses YoY, taking three-year CAGR to 34%

The most you can lose on any stock (assuming you don't use leverage) is 100% of your money. But if you buy shares in a really great company, you can more than double your money. For example, the Shenzhen Bingchuan Network Co.,Ltd. (SZSE:300533) share price has soared 121% in the last three years. Most would be happy with that. In more good news, the share price has risen 17% in thirty days.

The past week has proven to be lucrative for Shenzhen Bingchuan NetworkLtd investors, so let's see if fundamentals drove the company's three-year performance.

See our latest analysis for Shenzhen Bingchuan NetworkLtd

Shenzhen Bingchuan NetworkLtd isn't currently profitable, so most analysts would look to revenue growth to get an idea of how fast the underlying business is growing. Shareholders of unprofitable companies usually desire strong revenue growth. That's because it's hard to be confident a company will be sustainable if revenue growth is negligible, and it never makes a profit.

In the last 3 years Shenzhen Bingchuan NetworkLtd saw its revenue grow at 46% per year. That's much better than most loss-making companies. Along the way, the share price gained 30% per year, a solid pop by our standards. This suggests the market has recognized the progress the business has made, at least to a significant degree. That's not to say we think the share price is too high. In fact, it might be worth keeping an eye on this one.

The company's revenue and earnings (over time) are depicted in the image below (click to see the exact numbers).

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.

What About Dividends?

When looking at investment returns, it is important to consider the difference between total shareholder return (TSR) and share price return. Whereas the share price return only reflects the change in the share price, the TSR includes the value of dividends (assuming they were reinvested) and the benefit of any discounted capital raising or spin-off. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. We note that for Shenzhen Bingchuan NetworkLtd the TSR over the last 3 years was 139%, which is better than the share price return mentioned above. The dividends paid by the company have thusly boosted the total shareholder return.

A Different Perspective

Shenzhen Bingchuan NetworkLtd provided a TSR of 0.6% over the last twelve months. Unfortunately this falls short of the market return. On the bright side, the longer term returns (running at about 4% a year, over half a decade) look better. It may well be that this is a business worth popping on the watching, given the continuing positive reception, over time, from the market. 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. Consider for instance, the ever-present spectre of investment risk. We've identified 2 warning signs with Shenzhen Bingchuan NetworkLtd , and understanding them should be part of your investment process.

But note: Shenzhen Bingchuan NetworkLtd 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.