Nanjing Central Emporium (Group) Stocks (SHSE:600280) pops 17% this week, taking five-year gains to 84%

Generally speaking the aim of active stock picking is to find companies that provide returns that are superior to the market average. And the truth is, you can make significant gains if you buy good quality businesses at the right price. To wit, the Nanjing Central Emporium (Group) Stocks share price has climbed 84% in five years, easily topping the market return of 16% (ignoring dividends). On the other hand, the more recent gains haven't been so impressive, with shareholders gaining just 32%.

Since the stock has added CN¥824m 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 Nanjing Central Emporium (Group) Stocks

Nanjing Central Emporium (Group) Stocks 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. 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 5 years Nanjing Central Emporium (Group) Stocks saw its revenue shrink by 26% per year. Despite the lack of revenue growth, the stock has returned a respectable 13%, compound, over that time. To us that suggests that there probably isn't a lot of correlation between the past revenue performance and the share price, but a closer look at analyst forecasts and the bottom line may well explain a lot.

The image below shows how earnings and revenue have tracked over time (if you click on the image you can see greater detail).

If you are thinking of buying or selling Nanjing Central Emporium (Group) Stocks stock, you should check out this FREE detailed report on its balance sheet.

A Different Perspective

It's good to see that Nanjing Central Emporium (Group) Stocks has rewarded shareholders with a total shareholder return of 32% in the last twelve months. That gain is better than the annual TSR over five years, which is 13%. Therefore it seems like sentiment around the company has been positive lately. In the best case scenario, this may hint at some real business momentum, implying that now could be a great time to delve deeper. 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 1 warning sign with Nanjing Central Emporium (Group) Stocks , and understanding them should be part of your investment process.

We will like Nanjing Central Emporium (Group) Stocks better if we see some big insider buys. While we wait, check out this free list of undervalued stocks (mostly small caps) with considerable, recent, insider 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.