Y.U.D.Yangtze River Investment IndustryLtd (SHSE:600119) shareholder returns have been , earning 24% in 5 years

Generally speaking the aim of active stock picking is to find companies that provide returns that are superior to the market average. Buying under-rated businesses is one path to excess returns. For example, long term Y.U.D.Yangtze River Investment Industry Co.,Ltd. (SHSE:600119) shareholders have enjoyed a 24% share price rise over the last half decade, well in excess of the market return of around 0.5% (not including dividends). However, more recent returns haven't been as impressive as that, with the stock returning just 9.7% in the last year.

Since the stock has added CN¥237m to its market cap in the past week alone, let's see if underlying performance has been driving long-term returns.

View our latest analysis for Y.U.D.Yangtze River Investment IndustryLtd

We don't think that Y.U.D.Yangtze River Investment IndustryLtd's modest trailing twelve month profit has the market's full attention at the moment. We think revenue is probably a better guide. As a general rule, we think this kind of company is more comparable to loss-making stocks, since the actual profit is so low. For shareholders to have confidence a company will grow profits significantly, it must grow revenue.

For the last half decade, Y.U.D.Yangtze River Investment IndustryLtd can boast revenue growth at a rate of 9.3% per year. That's a fairly respectable growth rate. While the share price has beat the market, compounding at 4% yearly, over five years, there's certainly some potential that the market hasn't fully considered the growth track record. The key question is whether revenue growth will slow down, and if so, how quickly. 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).

Balance sheet strength is crucial. It might be well worthwhile taking a look at our free report on how its financial position has changed over time.

A Different Perspective

It's good to see that Y.U.D.Yangtze River Investment IndustryLtd has rewarded shareholders with a total shareholder return of 9.7% in the last twelve months. That gain is better than the annual TSR over five years, which is 4%. 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. For example, we've discovered 2 warning signs for Y.U.D.Yangtze River Investment IndustryLtd (1 makes us a bit uncomfortable!) that you should be aware of before investing here.

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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com