It might seem bad, but the worst that can happen when you buy a stock (without leverage) is that its share price goes to zero. But if you buy shares in a really great company, you can more than double your money. To wit, the Shanghai Dragon Corporation (SHSE:600630) share price has flown 126% in the last three years. That sort of return is as solid as granite. And in the last month, the share price has gained 17%. But this could be related to good market conditions -- stocks in its market are up 9.6% in the last month.

The past week has proven to be lucrative for Shanghai Dragon investors, so let's see if fundamentals drove the company's three-year performance.

Because Shanghai Dragon 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. Shareholders of unprofitable companies usually expect strong revenue growth. Some companies are willing to postpone profitability to grow revenue faster, but in that case one does expect good top-line growth.

In the last 3 years Shanghai Dragon saw its revenue shrink by 24% per year. So we wouldn't have expected the share price to gain 31% per year, but it has. It's a good reminder that expectations about the future, not the past history, always impact share prices.

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

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

A Different Perspective

It's nice to see that Shanghai Dragon shareholders have received a total shareholder return of 113% over the last year. Since the one-year TSR is better than the five-year TSR (the latter coming in at 4% per year), it would seem that the stock's performance has improved in recent times. 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 Shanghai Dragon better, we need to consider many other factors. Case in point: We've spotted 2 warning signs for Shanghai Dragon you should be aware of.

We will like Shanghai Dragon better if we see some big insider buys. While we wait, check out this free list of growing companies 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.