Generally speaking the aim of active stock picking is to find companies that provide returns that are superior to the market average. And while active stock picking involves risks (and requires diversification) it can also provide excess returns. To wit, the Optics Technology HoldingLtd share price has climbed 71% in five years, easily topping the market decline of 7.9% (ignoring dividends). However, more recent returns haven't been as impressive as that, with the stock returning just 4.2% in the last year.

Since it's been a strong week for Optics Technology HoldingLtd shareholders, let's have a look at trend of the longer term fundamentals.

Optics Technology HoldingLtd 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. Generally speaking, companies without profits are expected to grow revenue every year, and at a good clip. That's because fast revenue growth can be easily extrapolated to forecast profits, often of considerable size.

For the last half decade, Optics Technology HoldingLtd can boast revenue growth at a rate of 34% per year. That's well above most pre-profit companies. While the compound gain of 11% per year is good, it's not unreasonable given the strong revenue growth. If the strong revenue growth continues, we'd hope to see the share price to follow, in time. Of course, you'll have to research the business more fully to figure out if this is an attractive opportunity.

You can see below how earnings and revenue have changed over time (discover the exact values by clicking on the image).

You can see how its balance sheet has strengthened (or weakened) over time in this free interactive graphic.

A Different Perspective

It's good to see that Optics Technology HoldingLtd has rewarded shareholders with a total shareholder return of 4.2% in the last twelve months. However, that falls short of the 11% TSR per annum it has made for shareholders, each year, over five years. The pessimistic view would be that be that the stock has its best days behind it, but on the other hand the price might simply be moderating while the business itself continues to execute. 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. Like risks, for instance. Every company has them, and we've spotted 3 warning signs for Optics Technology HoldingLtd (of which 2 are a bit concerning!) you should know about.

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 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.