When you buy a stock there is always a possibility that it could drop 100%. But on a lighter note, a good company can see its share price rise well over 100%. For instance, the price of Jiangsu Hoperun Software Co., Ltd. (SZSE:300339) stock is up an impressive 193% over the last five years. Also pleasing for shareholders was the 23% gain in the last three months.
Since the stock has added CN¥3.9b to its market cap in the past week alone, let's see if underlying performance has been driving long-term returns.
See our latest analysis for Jiangsu Hoperun Software
While Jiangsu Hoperun Software 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.
For the last half decade, Jiangsu Hoperun Software can boast revenue growth at a rate of 10% per year. That's a pretty good long term growth rate. We'd argue this growth has been reflected in the share price which has climbed at a rate of 24% per year over in that time. It's well worth monitoring the growth trend in revenue, because if growth accelerates, that might signal an opportunity. When a growth trend accelerates, be it in revenue or earnings, it can indicate an inflection point for the business, which is can often be an opportunity for investors.
The company's revenue and earnings (over time) are depicted in the image below (click to see the exact numbers).
We know that Jiangsu Hoperun Software has improved its bottom line over the last three years, but what does the future have in store? It might be well worthwhile taking a look at our free report on how its financial position has changed over time.
A Different Perspective
We're pleased to report that Jiangsu Hoperun Software shareholders have received a total shareholder return of 75% over one year. Since the one-year TSR is better than the five-year TSR (the latter coming in at 24% per year), it would seem that the stock's performance has improved in recent times. Given the share price momentum remains strong, it might be worth taking a closer look at the stock, lest you miss an opportunity. It's always interesting to track share price performance over the longer term. But to understand Jiangsu Hoperun Software better, we need to consider many other factors. Like risks, for instance. Every company has them, and we've spotted 3 warning signs for Jiangsu Hoperun Software (of which 1 is significant!) you should know about.
If you would prefer to check out another company -- one with potentially superior financials -- then do not miss this free list of companies that have proven they can 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.