Generally speaking the aim of active stock picking is to find companies that provide returns that are superior to the market average. And while active stock picking involves risks (and requires diversification) it can also provide excess returns. For example, long term Hainan Meilan International Airport Company Limited (HKG:357) shareholders have enjoyed a 73% share price rise over the last half decade, well in excess of the market decline of around 5.5% (not including dividends). On the other hand, the more recent gains haven't been so impressive, with shareholders gaining just 24%.
The past week has proven to be lucrative for Hainan Meilan International Airport investors, so let's see if fundamentals drove the company's five-year performance.
View our latest analysis for Hainan Meilan International Airport
Given that Hainan Meilan International Airport 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 it's hard to be confident a company will be sustainable if revenue growth is negligible, and it never makes a profit.
In the last 5 years Hainan Meilan International Airport saw its revenue grow at 5.3% per year. Put simply, that growth rate fails to impress. While it's hard to say just how much value the company added over five years, the annualised share price gain of 12% seems about right. We'd be looking for the underlying business to grow revenue a bit faster.
The company's revenue and earnings (over time) are depicted in the image below (click to see the exact numbers).
You can see how its balance sheet has strengthened (or weakened) over time in this free interactive graphic.
A Different Perspective
It's good to see that Hainan Meilan International Airport has rewarded shareholders with a total shareholder return of 24% in the last twelve months. Since the one-year TSR is better than the five-year TSR (the latter coming in at 12% per year), it would seem that the stock's performance has improved in recent times. Given the share price momentum remains strong, it might be worth taking a closer look at the stock, lest you miss an opportunity. 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. Even so, be aware that Hainan Meilan International Airport is showing 1 warning sign in our investment analysis , you should know about...
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 Hong Kong 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.