Stock pickers are generally looking for stocks that will outperform the broader market. Buying under-rated businesses is one path to excess returns. For example, long term Hunan Tyen Machinery Co.,Ltd (SHSE:600698) shareholders have enjoyed a 71% share price rise over the last half decade, well in excess of the market return of around 16% (not including dividends). However, more recent returns haven't been as impressive as that, with the stock returning just 7.4% in the last year.

The past week has proven to be lucrative for Hunan Tyen MachineryLtd investors, so let's see if fundamentals drove the company's five-year performance.

We don't think that Hunan Tyen MachineryLtd'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.

In the last 5 years Hunan Tyen MachineryLtd saw its revenue shrink by 5.0% per year. Even though revenue hasn't increased, the stock actually gained 11%, per year, during the same period. It's probably worth checking other factors such as the profitability, to try to understand the share price action. It may not be reflecting the revenue.

You can see how earnings and revenue have changed over time in the image below (click on the chart to see the exact values).

This free interactive report on Hunan Tyen MachineryLtd's balance sheet strength is a great place to start, if you want to investigate the stock further.

A Different Perspective

Hunan Tyen MachineryLtd shareholders gained a total return of 7.4% during the year. Unfortunately this falls short of the market return. On the bright side, the longer term returns (running at about 11% a year, over half a decade) look better. It may well be that this is a business worth popping on the watching, given the continuing positive reception, over time, from the market. It's always interesting to track share price performance over the longer term. But to understand Hunan Tyen MachineryLtd better, we need to consider many other factors. To that end, you should be aware of the 1 warning sign we've spotted with Hunan Tyen MachineryLtd .

If you like to buy stocks alongside management, then you might just love this free list of companies. (Hint: many of them are unnoticed AND have attractive valuation).

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.