While shareholders of Shanghai Bright Power Semiconductor (SHSE:688368) are in the black over 5 years, those who bought a week ago aren't so fortunate

Stock pickers are generally looking for stocks that will outperform the broader market. And the truth is, you can make significant gains if you buy good quality businesses at the right price. To wit, the Shanghai Bright Power Semiconductor share price has climbed 91% in five years, easily topping the market return of 20% (ignoring dividends).

Although Shanghai Bright Power Semiconductor has shed CN¥819m from its market cap this week, let's take a look at its longer term fundamental trends and see if they've driven returns.

Shanghai Bright Power Semiconductor 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. Some companies are willing to postpone profitability to grow revenue faster, but in that case one would hope for good top-line growth to make up for the lack of earnings.

In the last 5 years Shanghai Bright Power Semiconductor saw its revenue grow at 3.7% per year. That's not a very high growth rate considering the bottom line. While it's hard to say just how much value the company added over five years, the annualised share price gain of 14% seems about right. We'd be looking for the underlying business to grow revenue a bit faster.

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

Take a more thorough look at Shanghai Bright Power Semiconductor's financial health with this free report on its balance sheet.

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. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. In the case of Shanghai Bright Power Semiconductor, it has a TSR of 98% for the last 5 years. That exceeds its share price return that we previously mentioned. And there's no prize for guessing that the dividend payments largely explain the divergence!

A Different Perspective

We're pleased to report that Shanghai Bright Power Semiconductor shareholders have received a total shareholder return of 86% over one year. And that does include the dividend. That gain is better than the annual TSR over five years, which is 15%. 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. It's always interesting to track share price performance over the longer term. But to understand Shanghai Bright Power Semiconductor better, we need to consider many other factors. Consider for instance, the ever-present spectre of investment risk. We've identified 2 warning signs with Shanghai Bright Power Semiconductor , and understanding them should be part of your investment process.

Of course, you might find a fantastic investment by looking elsewhere. So take a peek at this free list of companies we expect will 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.