Stock pickers are generally looking for stocks that will outperform the broader market. Buying under-rated businesses is one path to excess returns. For example, long term HPF Co.,Ltd (SZSE:300350) shareholders have enjoyed a 33% share price rise over the last half decade, well in excess of the market return of around 25% (not including dividends). However, more recent returns haven't been as impressive as that, with the stock returning just 22% in the last year.

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.

HPFLtd wasn't profitable in the last twelve months, it is unlikely we'll see a strong correlation between its share price and its earnings per share (EPS). Arguably revenue is our next best option. Generally speaking, companies without profits are expected to grow revenue every year, and at a good clip. 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.

Over the last half decade HPFLtd's revenue has actually been trending down at about 9.6% per year. Despite the lack of revenue growth, the stock has returned a respectable 6%, 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).

We're pleased to report that the CEO is remunerated more modestly than most CEOs at similarly capitalized companies. It's always worth keeping an eye on CEO pay, but a more important question is whether the company will grow earnings throughout the years. Before buying or selling a stock, we always recommend a close examination of historic growth trends, available here..

A Different Perspective

We're pleased to report that HPFLtd shareholders have received a total shareholder return of 22% over one year. 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. You could get a better understanding of HPFLtd's growth by checking out this more detailed historical graph of earnings, revenue and cash flow.

We will like HPFLtd 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.