By buying an index fund, investors can approximate the average market return. But if you choose individual stocks with prowess, you can make superior returns. For example, the KraussMaffei Company Limited (SHSE:600579) share price is up 45% in the last three years, clearly besting the market decline of around 13% (not including dividends). On the other hand, the returns haven't been quite so good recently, with shareholders up just 3.5%.

Since the stock has added CN¥383m 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 KraussMaffei

KraussMaffei wasn't profitable in the last twelve months, it is unlikely we'll see a strong correlation between its share price and its earnings per share (EPS). Arguably revenue is our next best option. Shareholders of unprofitable companies usually expect strong revenue growth. Some companies are willing to postpone profitability to grow revenue faster, but in that case one does expect good top-line growth.

KraussMaffei's revenue trended up 6.2% each year over three years. That's not a very high growth rate considering it doesn't make profits. The modest growth is probably broadly reflected in the share price, which is up 13%, per year over 3 years. Ultimately, the important thing is whether the company is trending to profitability. Given the market doesn't seem too excited about the stock, a closer look at the financial data could pay off, if you can find indications of a stronger growth trend in the future.

The company's revenue and earnings (over time) are depicted in the image below (click to see the exact numbers).

Take a more thorough look at KraussMaffei's financial health with this free report on its balance sheet.

A Different Perspective

It's good to see that KraussMaffei has rewarded shareholders with a total shareholder return of 3.5% in the last twelve months. That certainly beats the loss of about 4% per year over the last half decade. This makes us a little wary, but the business might have turned around its fortunes. While it is well worth considering the different impacts that market conditions can have on the share price, there are other factors that are even more important. Even so, be aware that KraussMaffei is showing 2 warning signs in our investment analysis , you should know about...

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.