The 12% return this week takes Guangzhou Pearl River Development Group's (SHSE:600684) shareholders three-year gains to 14%

By buying an index fund, you can roughly match the market return with ease. But if you pick the right individual stocks, you could make more than that. Just take a look at Guangzhou Pearl River Development Group Co., Ltd. (SHSE:600684), which is up 14%, over three years, soundly beating the market decline of 17% (not including dividends).

On the back of a solid 7-day performance, let's check what role the company's fundamentals have played in driving long term shareholder returns.

Check out our latest analysis for Guangzhou Pearl River Development Group

While Guangzhou Pearl River Development Group 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.

Over the last three years Guangzhou Pearl River Development Group has grown its revenue at 4.2% annually. That's not a very high growth rate considering it doesn't make profits. In that time the share price is up 4% per year, which is not unreasonable given the revenue growth. Ultimately, the important thing is whether the company is trending to profitability. Given the market doesn't seem too excited about the stock, a closer look at the financial data could pay off, if you can find indications of a stronger growth trend in the future.

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

If you are thinking of buying or selling Guangzhou Pearl River Development Group stock, you should check out this FREE detailed report on its balance sheet.

A Different Perspective

Guangzhou Pearl River Development Group shareholders are down 2.2% for the year, but the market itself is up 7.4%. Even the share prices of good stocks drop sometimes, but we want to see improvements in the fundamental metrics of a business, before getting too interested. Regrettably, last year's performance caps off a bad run, with the shareholders facing a total loss of 0.5% per year over five years. We realise that Baron Rothschild has said investors should "buy when there is blood on the streets", but we caution that investors should first be sure they are buying a high quality business. 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 instance, we've identified 1 warning sign for Guangzhou Pearl River Development Group that you should be aware of.

But note: Guangzhou Pearl River Development Group 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.