Nanning Department Store (SHSE:600712) spikes 19% this week, taking three-year gains to 12%

By buying an index fund, you can roughly match the market return with ease. But if you choose individual stocks with prowess, you can make superior returns. For example, the Nanning Department Store Co., Ltd. (SHSE:600712) share price is up 12% in the last three years, clearly besting the market decline of around 25% (not including dividends). However, more recent returns haven't been as impressive as that, with the stock returning just 2.2% in the last year.

Since the stock has added CN¥370m to its market cap in the past week alone, let's see if underlying performance has been driving long-term returns.

Check out our latest analysis for Nanning Department Store

Given that Nanning Department Store only made minimal earnings in the last twelve months, we'll focus on revenue to gauge its business development. 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.

Nanning Department Store actually saw its revenue drop by 9.3% per year over three years. Despite the lack of revenue growth, the stock has returned 4%, 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.

You can see below how earnings and revenue have changed over time (discover the exact values by clicking on the image).

It's probably worth noting that the CEO is paid less than the median at similar sized companies. But while CEO remuneration is always worth checking, the really important question is whether the company can grow earnings going forward. Dive deeper into the earnings by checking this interactive graph of Nanning Department Store's earnings, revenue and cash flow.

A Different Perspective

It's good to see that Nanning Department Store has rewarded shareholders with a total shareholder return of 2.2% in the last twelve months. Since the one-year TSR is better than the five-year TSR (the latter coming in at 1.7% per year), it would seem that the stock's performance has improved in recent times. Given the share price momentum remains strong, it might be worth taking a closer look at the stock, lest you miss an opportunity. It's always interesting to track share price performance over the longer term. But to understand Nanning Department Store better, we need to consider many other factors. For instance, we've identified 1 warning sign for Nanning Department Store that 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.