By buying an index fund, you can roughly match the market return with ease. But if you pick the right individual stocks, you could make more than that. Just take a look at The Pacific Securities Co., Ltd (SHSE:601099), which is up 42%, over three years, soundly beating the market decline of 18% (not including dividends). On the other hand, the returns haven't been quite so good recently, with shareholders up just 19%.

After a strong gain in the past week, it's worth seeing if longer term returns have been driven by improving fundamentals.

While Pacific Securities made a small profit, in the last year, we think that the market is probably more focussed on the top line growth at the moment. 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.

In the last 3 years Pacific Securities saw its revenue shrink by 11% per year. The revenue growth might be lacking but the share price has gained 12% each year in that time. Unless the company is going to make profits soon, we would be pretty cautious about it.

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

If you are thinking of buying or selling Pacific Securities stock, you should check out this FREE detailed report on its balance sheet.

A Different Perspective

It's nice to see that Pacific Securities shareholders have received a total shareholder return of 19% over the last year. That's better than the annualised return of 6% over half a decade, implying that the company is doing better recently. Someone with an optimistic perspective could view the recent improvement in TSR as indicating that the business itself is getting better with time. It's always interesting to track share price performance over the longer term. But to understand Pacific Securities better, we need to consider many other factors. Case in point: We've spotted 1 warning sign for Pacific Securities you should be aware of.

If you would prefer to check out another company -- one with potentially superior financials -- then do not miss this free list of companies that have proven they can 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.