One simple way to benefit from the stock market is to buy an index fund. But if you pick the right individual stocks, you could make more than that. For example, JC Finance & Tax Interconnect Holdings Ltd. (SZSE:002530) shareholders have seen the share price rise 39% over three years, well in excess of the market decline (19%, not including dividends). On the other hand, the returns haven't been quite so good recently, with shareholders up just 12%.

While the stock has fallen 9.7% this week, it's worth focusing on the longer term and seeing if the stocks historical returns have been driven by the underlying fundamentals.

Because JC Finance & Tax Interconnect 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.

JC Finance & Tax Interconnect Holdings' revenue trended up 2.9% each year over three years. That's not a very high growth rate considering it doesn't make profits. In that time the share price is up 12% per year, which is not unreasonable given the revenue growth. The real question is when the business will generate profits, and how quickly they will grow. In this sort of situation it can be worth putting the stock on your watchlist. If it can become profitable, then even moderate revenue growth could grow profits quickly.

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

JC Finance & Tax Interconnect Holdings shareholders gained a total return of 12% during the year. But that return falls short of the market. But at least that's still a gain! Over five years the TSR has been a reduction of 4% per year, over five years. It could well be that the business is stabilizing. I find it very interesting to look at share price over the long term as a proxy for business performance. But to truly gain insight, we need to consider other information, too. For example, we've discovered 1 warning sign for JC Finance & Tax Interconnect Holdings that you should be aware of before investing here.

For those who like to find winning investments this free list of undervalued companies with recent insider purchasing, could be just the ticket.

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.