When we invest, we're generally looking for stocks that outperform the market average. And the truth is, you can make significant gains if you buy good quality businesses at the right price. For example, long term Shenzhen WOTE Advanced Materials Co.,Ltd (SZSE:002886) shareholders have enjoyed a 75% share price rise over the last half decade, well in excess of the market return of around 36% (not including dividends). However, more recent returns haven't been as impressive as that, with the stock returning just 6.9% in the last year , including dividends .

Since the long term performance has been good but there's been a recent pullback of 8.0%, let's check if the fundamentals match the share price.

Check out our latest analysis for Shenzhen WOTE Advanced MaterialsLtd

We don't think that Shenzhen WOTE Advanced MaterialsLtd's modest trailing twelve month profit has the market's full attention at the moment. We think revenue is probably a better guide. 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, Shenzhen WOTE Advanced MaterialsLtd can boast revenue growth at a rate of 15% per year. That's well above most pre-profit companies. It's good to see that the stock has 12%, but not entirely surprising given revenue shows strong growth. If you think there could be more growth to come, now might be the time to take a close look at Shenzhen WOTE Advanced MaterialsLtd. Of course, you'll have to research the business more fully to figure out if this is an attractive opportunity.

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

You can see how its balance sheet has strengthened (or weakened) over time in this free interactive graphic.

What About Dividends?

When looking at investment returns, it is important to consider the difference between total shareholder return (TSR) and share price return. The TSR incorporates the value of any spin-offs or discounted capital raisings, along with any dividends, based on the assumption that the dividends are reinvested. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. We note that for Shenzhen WOTE Advanced MaterialsLtd the TSR over the last 5 years was 77%, which is better than the share price return mentioned above. This is largely a result of its dividend payments!

A Different Perspective

We're pleased to report that Shenzhen WOTE Advanced MaterialsLtd shareholders have received a total shareholder return of 6.9% over one year. Of course, that includes the dividend. However, the TSR over five years, coming in at 12% per year, is even more impressive. Potential buyers might understandably feel they've missed the opportunity, but it's always possible business is still firing on all cylinders. 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. Even so, be aware that Shenzhen WOTE Advanced MaterialsLtd is showing 5 warning signs in our investment analysis , and 1 of those can't be ignored...

If you are like me, then you will not want to miss this free list of growing companies that insiders are 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.