XiaMen HongXin Electron-tech GroupLtd (SZSE:300657) pulls back 5.1% this week, but still delivers shareholders favorable 8.3% CAGR over 5 years

When we invest, we're generally looking for stocks that outperform the market average. And in our experience, buying the right stocks can give your wealth a significant boost. For example, the XiaMen HongXin Electron-tech Group Co.,Ltd (SZSE:300657) share price is up 48% in the last 5 years, clearly besting the market return of around 12% (ignoring dividends). On the other hand, the more recent gains haven't been so impressive, with shareholders gaining just 5.1%.

While the stock has fallen 5.1% this week, it's worth focusing on the longer term and seeing if the stocks historical returns have been driven by the underlying fundamentals.

See our latest analysis for XiaMen HongXin Electron-tech GroupLtd

XiaMen HongXin Electron-tech GroupLtd 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. That's because fast revenue growth can be easily extrapolated to forecast profits, often of considerable size.

In the last 5 years XiaMen HongXin Electron-tech GroupLtd saw its revenue grow at 8.2% per year. That's a pretty good long term growth rate. While the share price has beat the market, compounding at 8% yearly, over five years, there's certainly some potential that the market hasn't fully considered the growth track record. If revenue growth can maintain for long enough, it's likely profits will flow. Lack of earnings means you have to project further into the future justify the valuation on the basis of future free cash flow.

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 XiaMen HongXin Electron-tech GroupLtd's balance sheet strength is a great place to start, if you want to investigate the stock further.

A Different Perspective

We're pleased to report that XiaMen HongXin Electron-tech GroupLtd shareholders have received a total shareholder return of 5.1% over one year. However, the TSR over five years, coming in at 8% per year, is even more impressive. Potential buyers might understandably feel they've missed the opportunity, but it's always possible business is still firing on all cylinders. 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. Take risks, for example - XiaMen HongXin Electron-tech GroupLtd has 1 warning sign we think you should be aware of.

But note: XiaMen HongXin Electron-tech GroupLtd 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.