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. For example, Hunan Huamin Holdings Co., Ltd. (SZSE:300345) shareholders have seen the share price rise 75% over three years, well in excess of the market decline (22%, not including dividends).
After a strong gain in the past week, it's worth seeing if longer term returns have been driven by improving fundamentals.
Because Hunan Huamin Holdings made a loss in the last twelve months, we think the market is probably more focussed on revenue and revenue growth, at least for now. 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.
Hunan Huamin Holdings' revenue trended up 65% each year over three years. That's much better than most loss-making companies. While the compound gain of 21% per year over three years is pretty good, you might argue it doesn't fully reflect the strong revenue growth. So now might be the perfect time to put Hunan Huamin Holdings on your radar. A window of opportunity may reveal itself with time, if the business can trend to profitability.
The image below shows how earnings and revenue have tracked over time (if you click on the image you can see greater detail).
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
We regret to report that Hunan Huamin Holdings shareholders are down 23% for the year. Unfortunately, that's worse than the broader market decline of 16%. However, it could simply be that the share price has been impacted by broader market jitters. It might be worth keeping an eye on the fundamentals, in case there's a good opportunity. On the bright side, long term shareholders have made money, with a gain of 7% per year over half a decade. If the fundamental data continues to indicate long term sustainable growth, the current sell-off could be an opportunity worth considering. It's always interesting to track share price performance over the longer term. But to understand Hunan Huamin Holdings better, we need to consider many other factors. Even so, be aware that Hunan Huamin Holdings is showing 1 warning sign in our investment analysis , you should know about...
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.
