The simplest way to invest in stocks is to buy exchange traded funds. But if you pick the right individual stocks, you could make more than that. To wit, the CITIC Guoan Information Industry Co., Ltd. (SZSE:000839) share price is 39% higher than it was a year ago, much better than the market return of around 8.3% (not including dividends) in the same period. So that should have shareholders smiling. The longer term returns have not been as good, with the stock price only 19% higher than it was three years ago.

Since the long term performance has been good but there's been a recent pullback of 7.8%, let's check if the fundamentals match the share price.

We don't think that CITIC Guoan Information Industry's modest trailing twelve month profit has the market's full attention at the moment. We think revenue is probably a better guide. As a general rule, we think this kind of company is more comparable to loss-making stocks, since the actual profit is so low. It would be hard to believe in a more profitable future without growing revenues.

Over the last twelve months, CITIC Guoan Information Industry's revenue grew by 19%. We respect that sort of growth, no doubt. While the share price performed well, gaining 39% over twelve months, you could argue the revenue growth warranted it. If revenue stays on trend, there may be plenty more share price gains to come. But it's crucial to check profitability and cash flow before forming a view on the future.

The image below shows how earnings and revenue have tracked over time (if you click on the image you can see greater detail).

Balance sheet strength is crucial. It might be well worthwhile taking a look at our free report on how its financial position has changed over time.

A Different Perspective

We're pleased to report that CITIC Guoan Information Industry shareholders have received a total shareholder return of 39% over one year. That certainly beats the loss of about 2% 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. Consider for instance, the ever-present spectre of investment risk. We've identified 2 warning signs with CITIC Guoan Information Industry (at least 1 which is a bit concerning) , and understanding them should be part of your investment process.

We will like CITIC Guoan Information Industry better if we see some big insider buys. While we wait, check out this free list of undervalued stocks (mostly small caps) with considerable, recent, insider buying.

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.