Shenwan Hongyuan (H.K.) (HKG:218) shareholder returns have been massive, earning 557% in 1 year

While some are satisfied with an index fund, active investors aim to find truly magnificent investments on the stock market. When you buy and hold the right company, the returns can make a huge difference to both you and your family. For example, Shenwan Hongyuan (H.K.) Limited (HKG:218) has generated a beautiful 557% return in just a single year. It's also good to see the share price up 85% over the last quarter. It is also impressive that the stock is up 223% over three years, adding to the sense that it is a real winner. It really delights us to see such great share price performance for investors.

On the back of a solid 7-day performance, let's check what role the company's fundamentals have played in driving long term shareholder returns.

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Given that Shenwan Hongyuan (H.K.) didn't make a profit in the last twelve months, we'll focus on revenue growth to form a quick view of its business development. Generally speaking, companies without profits are expected to grow revenue every year, and at a good clip. 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 year Shenwan Hongyuan (H.K.) saw its revenue shrink by 39%. So it's very confusing to see that the share price gained a whopping 557%. There can be no doubt this kind of decoupling of revenue growth and share price growth is unusual to see in loss making companies. To us, a gain like this looks like speculation, but there might be historical trends to back it up.

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 Shenwan Hongyuan (H.K.)'s financial health with this free report on its balance sheet.

A Different Perspective

It's nice to see that Shenwan Hongyuan (H.K.) shareholders have received a total shareholder return of 557% over the last year. Since the one-year TSR is better than the five-year TSR (the latter coming in at 11% per year), it would seem that the stock's performance has improved in recent times. Someone with an optimistic perspective could view the recent improvement in TSR as indicating that the business itself is getting better with time. 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 - Shenwan Hongyuan (H.K.) has 2 warning signs we think you should be aware of.

If you like to buy stocks alongside management, then you might just love this free list of companies. (Hint: many of them are unnoticed AND have attractive valuation).

Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on Hong Kong 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.