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. For example, long term Nanjing Public Utilities Development Co., Ltd. (SZSE:000421) shareholders have enjoyed a 31% share price rise over the last half decade, well in excess of the market return of around 18% (not including dividends). On the other hand, the more recent gains haven't been so impressive, with shareholders gaining just 14%, including dividends.

Since it's been a strong week for Nanjing Public Utilities Development shareholders, let's have a look at trend of the longer term fundamentals.

Nanjing Public Utilities Development isn't currently profitable, so most analysts would look to revenue growth to get an idea of how fast the underlying business is growing. Generally speaking, companies without profits are expected to grow revenue every year, and at a good clip. That's because it's hard to be confident a company will be sustainable if revenue growth is negligible, and it never makes a profit.

In the last 5 years Nanjing Public Utilities Development saw its revenue grow at 5.2% per year. Put simply, that growth rate fails to impress. While it's hard to say just how much value the company added over five years, the annualised share price gain of 6% seems about right. We'd be looking for the underlying business to grow revenue a bit faster.

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

This free interactive report on Nanjing Public Utilities Development's balance sheet strength is a great place to start, if you want to investigate the stock further.

What About Dividends?

When looking at investment returns, it is important to consider the difference between total shareholder return (TSR) and share price return. The TSR is a return calculation that accounts for the value of cash dividends (assuming that any dividend received was reinvested) and the calculated value of any discounted capital raisings and spin-offs. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. As it happens, Nanjing Public Utilities Development's TSR for the last 5 years was 43%, which exceeds the share price return mentioned earlier. The dividends paid by the company have thusly boosted the total shareholder return.

A Different Perspective

It's nice to see that Nanjing Public Utilities Development shareholders have received a total shareholder return of 14% over the last year. Of course, that includes the dividend. That gain is better than the annual TSR over five years, which is 7%. 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. It's always interesting to track share price performance over the longer term. But to understand Nanjing Public Utilities Development better, we need to consider many other factors. Consider risks, for instance. Every company has them, and we've spotted 4 warning signs for Nanjing Public Utilities Development 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.

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