One simple way to benefit from the stock market is to buy an index fund. But many of us dare to dream of bigger returns, and build a portfolio ourselves. Just take a look at Changzhou Tronly New Electronic Materials Co., Ltd. (SZSE:300429), which is up 21%, over three years, soundly beating the market decline of 19% (not including dividends). However, more recent returns haven't been as impressive as that, with the stock returning just 4.6% in the last year.

Since the stock has added CN¥419m to its market cap in the past week alone, let's see if underlying performance has been driving long-term returns.

Changzhou Tronly New Electronic Materials isn't currently profitable, so most analysts would look to revenue growth to get an idea of how fast the underlying business is growing. When a company doesn't make profits, we'd generally hope to see good revenue growth. That's because fast revenue growth can be easily extrapolated to forecast profits, often of considerable size.

Changzhou Tronly New Electronic Materials actually saw its revenue drop by 8.7% per year over three years. Despite the lack of revenue growth, the stock has returned 7%, compound, over three years. Unless the company is going to make profits soon, we would be pretty cautious about it.

The company's revenue and earnings (over time) are depicted in the image below (click to see the exact numbers).

Balance sheet strength is crucial. It might be well worthwhile taking a look at our free report on how its financial position has changed over time.

A Different Perspective

Changzhou Tronly New Electronic Materials provided a TSR of 4.6% over the last twelve months. Unfortunately this falls short of the market return. On the bright side, that's still a gain, and it's actually better than the average return of 1.7% over half a decade It is possible that returns will improve along with the business fundamentals. It's always interesting to track share price performance over the longer term. But to understand Changzhou Tronly New Electronic Materials better, we need to consider many other factors. Case in point: We've spotted 3 warning signs for Changzhou Tronly New Electronic Materials you should be aware of, and 2 of them are potentially serious.

Of course Changzhou Tronly New Electronic Materials may not be the best stock to buy. So you may wish to see this free collection of growth stocks.

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.