Stock pickers are generally looking for stocks that will outperform the broader market. And in our experience, buying the right stocks can give your wealth a significant boost. For example, long term Ningbo Lehui International Engineering Equipment Co.,Ltd (SHSE:603076) shareholders have enjoyed a 69% 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 4.9% in the last year, including dividends.

The past week has proven to be lucrative for Ningbo Lehui International Engineering EquipmentLtd investors, so let's see if fundamentals drove the company's five-year performance.

While Ningbo Lehui International Engineering EquipmentLtd 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.

In the last 5 years Ningbo Lehui International Engineering EquipmentLtd saw its revenue grow at 16% per year. Even measured against other revenue-focussed companies, that's a good result. While the compound gain of 11% per year is good, it's not unreasonable given the strong revenue growth. If the strong revenue growth continues, we'd hope to see the share price to follow, in time. Of course, you'll have to research the business more fully to figure out if this is an attractive opportunity.

The company's revenue and earnings (over time) are depicted in the image below (click to see the exact numbers).

We know that Ningbo Lehui International Engineering EquipmentLtd has improved its bottom line lately, but what does the future have in store? This free report showing analyst forecasts should help you form a view on Ningbo Lehui International Engineering EquipmentLtd

What About Dividends?

It is important to consider the total shareholder return, as well as the share price return, for any given stock. 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. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. As it happens, Ningbo Lehui International Engineering EquipmentLtd's TSR for the last 5 years was 71%, which exceeds the share price return mentioned earlier. This is largely a result of its dividend payments!

A Different Perspective

Ningbo Lehui International Engineering EquipmentLtd shareholders are up 4.9% for the year (even including dividends). But that return falls short of the market. It's probably a good sign that the company has an even better long term track record, having provided shareholders with an annual TSR of 11% over five years. 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 Ningbo Lehui International Engineering EquipmentLtd better, we need to consider many other factors. Consider for instance, the ever-present spectre of investment risk. We've identified 2 warning signs with Ningbo Lehui International Engineering EquipmentLtd , and understanding them should be part of your investment process.

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.