Shareholders have faith in loss-making Liaoning Shenhua HoldingsLtd (SHSE:600653) as stock climbs 24% in past week, taking three-year gain to 49%

By buying an index fund, investors can approximate the average market return. But if you buy good businesses at attractive prices, your portfolio returns could exceed the average market return. For example, Liaoning Shenhua Holdings Co.,Ltd (SHSE:600653) shareholders have seen the share price rise 49% over three years, well in excess of the market decline (18%, not including dividends).

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

View our latest analysis for Liaoning Shenhua HoldingsLtd

Liaoning Shenhua HoldingsLtd isn't currently profitable, so most analysts would look to revenue growth to get an idea of how fast the underlying business is growing. 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.

Liaoning Shenhua HoldingsLtd actually saw its revenue drop by 16% per year over three years. Despite the lack of revenue growth, the stock has returned 14%, compound, over three years. If the company is cutting costs profitability could be on the horizon, but the revenue decline is a prima facie concern.

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

This free interactive report on Liaoning Shenhua HoldingsLtd's balance sheet strength is a great place to start, if you want to investigate the stock further.

A Different Perspective

It's nice to see that Liaoning Shenhua HoldingsLtd shareholders have received a total shareholder return of 47% over the last year. That gain is better than the annual TSR over five years, which is 7%. 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. Case in point: We've spotted 1 warning sign for Liaoning Shenhua HoldingsLtd you should be aware of.

If you would prefer to check out another company -- one with potentially superior financials -- then do not miss this free list of companies that have proven they can grow earnings.

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.