Generally speaking the aim of active stock picking is to find companies that provide returns that are superior to the market average. And the truth is, you can make significant gains if you buy good quality businesses at the right price. For example, the Shandong Tongda Island New Materials Co.,Ltd. (SZSE:300321) share price is up 27% in the last 5 years, clearly besting the market return of around 3.2% (ignoring dividends). On the other hand, the more recent gains haven't been so impressive, with shareholders gaining just 12%.

On the back of a solid 7-day performance, let's check what role the company's fundamentals have played in driving long term shareholder returns.

While Shandong Tongda Island New MaterialsLtd 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 5 years Shandong Tongda Island New MaterialsLtd saw its revenue shrink by 3.6% per year. Despite the lack of revenue growth, the stock has returned a respectable 5%, compound, over that time. To us that suggests that there probably isn't a lot of correlation between the past revenue performance and the share price, but a closer look at analyst forecasts and the bottom line may well explain a lot.

You can see below how earnings and revenue have changed over time (discover the exact values by clicking on the image).

Take a more thorough look at Shandong Tongda Island New MaterialsLtd's financial health with this free report on its balance sheet.

What About The Total Shareholder Return (TSR)?

We've already covered Shandong Tongda Island New MaterialsLtd's share price action, but we should also mention its total shareholder return (TSR). Arguably the TSR is a more complete return calculation because it accounts for the value of dividends (as if they were reinvested), along with the hypothetical value of any discounted capital that have been offered to shareholders. Dividends have been really beneficial for Shandong Tongda Island New MaterialsLtd shareholders, and that cash payout contributed to why its TSR of 32%, over the last 5 years, is better than the share price return.

A Different Perspective

It's good to see that Shandong Tongda Island New MaterialsLtd has rewarded shareholders with a total shareholder return of 12% in the last twelve months. That gain is better than the annual TSR over five years, which is 6%. Therefore it seems like sentiment around the company has been positive lately. 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 Shandong Tongda Island New MaterialsLtd better, we need to consider many other factors. Even so, be aware that Shandong Tongda Island New MaterialsLtd is showing 3 warning signs in our investment analysis , and 2 of those are a bit concerning...

Of course, you might find a fantastic investment by looking elsewhere. So take a peek at this free list of companies we expect will 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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com