These days it's easy to simply buy an index fund, and your returns should (roughly) match the market. But you can significantly boost your returns by picking above-average stocks. For example, the Shanghai Electric Group Co., Ltd. (HKG:2727) share price is up 75% in the last 1 year, clearly besting the market return of around 13% (not including dividends). So that should have shareholders smiling. However, the longer term returns haven't been so impressive, with the stock up just 25% in the last three years.

In light of the stock dropping 6.1% in the past week, we want to investigate the longer term story, and see if fundamentals have been the driver of the company's positive one-year return.

Given that Shanghai Electric Group only made minimal earnings in the last twelve months, we'll focus on revenue to gauge its business development. Generally speaking, we'd consider a stock like this alongside loss-making companies, simply because the quantum of the profit is so low. It would be hard to believe in a more profitable future without growing revenues.

In the last year Shanghai Electric Group saw its revenue shrink by 4.2%. The stock is up 75% in that time, a fine performance given the revenue drop. To us that means that there 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.

The graphic below depicts how earnings and revenue have changed over time (unveil the exact values by clicking on the image).

We know that Shanghai Electric Group has improved its bottom line over the last three years, but what does the future have in store? Take a more thorough look at Shanghai Electric Group's financial health with this free report on its balance sheet.

A Different Perspective

We're pleased to report that Shanghai Electric Group shareholders have received a total shareholder return of 75% over one year. That's better than the annualised return of 5% over half a decade, implying that the company is doing better recently. In the best case scenario, this may hint at some real business momentum, implying that now could be a great time to delve deeper. I find it very interesting to look at share price over the long term as a proxy for business performance. But to truly gain insight, we need to consider other information, too. To that end, you should be aware of the 1 warning sign we've spotted with Shanghai Electric Group .

We will like Shanghai Electric Group 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 Hong Kong 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.