By buying an index fund, investors can approximate the average market return. But if you choose individual stocks with prowess, you can make superior returns. For example, Chengdu SIWI Science and Technology Company Limited (HKG:1202) shareholders have seen the share price rise 49% over three years, well in excess of the market decline (17%, not including dividends).

After a strong gain in the past week, it’s worth seeing if longer term returns have been driven by improving fundamentals.

Check out our latest analysis for Chengdu SIWI Science and Technology

Chengdu SIWI Science and Technology isn’t currently profitable, so most analysts would look to revenue growth to get an idea of how fast the underlying business is growing. Shareholders of unprofitable companies usually expect strong revenue growth. Some companies are willing to postpone profitability to grow revenue faster, but in that case one does expect good top-line growth.

Chengdu SIWI Science and Technology actually saw its revenue drop by 29% per year over three years. Despite the lack of revenue growth, the stock has returned 14%, compound, over three years. If the company is cutting costs profitability could be on the horizon, but the revenue decline is a prima facie concern.

You can see below how earnings and revenue have changed over time (discover the exact values by clicking on the image).

This free interactive report on Chengdu SIWI Science and Technology’s balance sheet strength is a great place to start, if you want to investigate the stock further.

A Different Perspective

We regret to report that Chengdu SIWI Science and Technology shareholders are down 44% for the year. Unfortunately, that’s worse than the broader market decline of 13%. Having said that, it’s inevitable that some stocks will be oversold in a falling market. The key is to keep your eyes on the fundamental developments. Unfortunately, last year’s performance may indicate unresolved challenges, given that it was worse than the annualised loss of 4% over the last half decade. We realise that Baron Rothschild has said investors should “buy when there is blood on the streets”, but we caution that investors should first be sure they are buying a high quality business. It’s always interesting to track share price performance over the longer term. But to understand Chengdu SIWI Science and Technology better, we need to consider many other factors. For example, we’ve discovered 2 warning signs for Chengdu SIWI Science and Technology (1 is a bit concerning!) that you should be aware of before investing here.

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 HK 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.