Passive investing in index funds can generate returns that roughly match the overall market. But you can significantly boost your returns by picking above-average stocks. For example, the Jilin Liyuan Precision Manufacturing Co., Ltd. (SZSE:002501) share price is up 69% in the last 1 year, clearly besting the market return of around 9.4% (not including dividends). If it can keep that out-performance up over the long term, investors will do very well! However, the stock hasn't done so well in the longer term, with the stock only up 18% in three years.

Since the stock has added CN¥2.0b to its market cap in the past week alone, let's see if underlying performance has been driving long-term returns.

Given that Jilin Liyuan Precision Manufacturing didn't make a profit in the last twelve months, we'll focus on revenue growth to form a quick view of its business development. Shareholders of unprofitable companies usually desire strong revenue growth. That's because fast revenue growth can be easily extrapolated to forecast profits, often of considerable size.

In the last year Jilin Liyuan Precision Manufacturing saw its revenue shrink by 38%. The stock is up 69% in that time, a fine performance given the revenue drop. We can correlate the share price rise with revenue or profit growth, but it seems the market had previously expected weaker results, and sentiment around the stock is improving.

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

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

It's good to see that Jilin Liyuan Precision Manufacturing has rewarded shareholders with a total shareholder return of 69% in the last twelve months. That's better than the annualised return of 10% over half a decade, implying that the company is doing better recently. Given the share price momentum remains strong, it might be worth taking a closer look at the stock, lest you miss an opportunity. 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. Even so, be aware that Jilin Liyuan Precision Manufacturing is showing 2 warning signs in our investment analysis , and 1 of those doesn't sit too well with us...

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.