The worst result, after buying shares in a company (assuming no leverage), would be if you lose all the money you put in. But if you buy shares in a really great company, you can more than double your money. For example, the Annil Co.,Ltd (SZSE:002875) share price has soared 108% in the last three years. How nice for those who held the stock! It's also up 64% in about a month.

Since the stock has added CN¥1.4b to its market cap in the past week alone, let's see if underlying performance has been driving long-term returns.

Given that AnnilLtd didn't make a profit in the last twelve months, we'll focus on revenue growth to form a quick view of its business development. Shareholders of unprofitable companies usually expect strong revenue growth. 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.

AnnilLtd actually saw its revenue drop by 16% per year over three years. So we wouldn't have expected the share price to gain 28% per year, but it has. It's a good reminder that expectations about the future, not the past history, always impact share prices.

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

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

A Different Perspective

Although it hurts that AnnilLtd returned a loss of 9.4% in the last twelve months, the broader market was actually worse, returning a loss of 16%. Of course, the long term returns are far more important and the good news is that over five years, the stock has returned 0.8% for each year. It could be that the business is just facing some short term problems, but shareholders should keep a close eye on the fundamentals. It's always interesting to track share price performance over the longer term. But to understand AnnilLtd better, we need to consider many other factors. To that end, you should be aware of the 2 warning signs we've spotted with AnnilLtd .

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.

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.