One simple way to benefit from the stock market is to buy an index fund. But if you choose individual stocks with prowess, you can make superior returns. For example, the Heilongjiang Interchina Water Treatment Co.,Ltd (SHSE:600187) share price is up 26% in the last three years, clearly besting the market decline of around 37% (not including dividends). On the other hand, the returns haven't been quite so good recently, with shareholders up just 11%.

Since the stock has added CN¥646m to its market cap in the past week alone, let's see if underlying performance has been driving long-term returns.

We don't think that Heilongjiang Interchina Water TreatmentLtd's modest trailing twelve month profit has the market's full attention at the moment. We think revenue is probably a better guide. Generally speaking, we'd consider a stock like this alongside loss-making companies, simply because the quantum of the profit is so low. For shareholders to have confidence a company will grow profits significantly, it must grow revenue.

Heilongjiang Interchina Water TreatmentLtd actually saw its revenue drop by 25% per year over three years. The revenue growth might be lacking but the share price has gained 8% each year in that time. 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).

Take a more thorough look at Heilongjiang Interchina Water TreatmentLtd's financial health with this free report on its balance sheet.

A Different Perspective

We're pleased to report that Heilongjiang Interchina Water TreatmentLtd shareholders have received a total shareholder return of 11% over one year. Since the one-year TSR is better than the five-year TSR (the latter coming in at 4% per year), it would seem that the stock's performance has improved in recent times. In the best case scenario, this may hint at some real business momentum, implying that now could be a great time to delve deeper. While it is well worth considering the different impacts that market conditions can have on the share price, there are other factors that are even more important. Like risks, for instance. Every company has them, and we've spotted 3 warning signs for Heilongjiang Interchina Water TreatmentLtd (of which 2 can't be ignored!) you should know about.

Of course, you might find a fantastic investment by looking elsewhere. So take a peek at this free list of companies we expect will 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.