If you want to compound wealth in the stock market, you can do so by buying an index fund. But one can do better than that by picking better than average stocks (as part of a diversified portfolio). To wit, the Xingyuan Environment Technology Co., Ltd. (SZSE:300266) share price is 12% higher than it was a year ago, much better than the market return of around 7.6% (not including dividends) in the same period. So that should have shareholders smiling. Zooming out, the stock is actually down 5.0% in the last three years.

The past week has proven to be lucrative for Xingyuan Environment Technology investors, so let's see if fundamentals drove the company's one-year performance.

Because Xingyuan Environment Technology made a loss in the last twelve months, we think the market is probably more focussed on revenue and revenue growth, at least for now. When a company doesn't make profits, we'd generally hope to see good revenue growth. That's because fast revenue growth can be easily extrapolated to forecast profits, often of considerable size.

Xingyuan Environment Technology actually shrunk its revenue over the last year, with a reduction of 33%. Despite the lack of revenue growth, the stock has returned a solid 12% the last twelve months. We can correlate the share price rise with revenue or profit growth, but it seems the market had previously expected weaker results, and sentiment around the stock is improving.

You can see how earnings and revenue have changed over time in the image below (click on the chart to see the exact values).

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

A Different Perspective

We're pleased to report that Xingyuan Environment Technology shareholders have received a total shareholder return of 12% over one year. There's no doubt those recent returns are much better than the TSR loss of 0.2% per year over five years. This makes us a little wary, but the business might have turned around its fortunes. It's always interesting to track share price performance over the longer term. But to understand Xingyuan Environment Technology better, we need to consider many other factors. Consider for instance, the ever-present spectre of investment risk. We've identified 2 warning signs with Xingyuan Environment Technology , and understanding them should be part of your investment process.

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.