By buying an index fund, you can roughly match the market return with ease. But if you pick the right individual stocks, you could make more than that. Just take a look at MAX Automation SE (ETR:MXHN), which is up 43%, over three years, soundly beating the market decline of 17% (not including dividends). On the other hand, the returns haven’t been quite so good recently, with shareholders up just 8.8%.

So let’s investigate and see if the longer term performance of the company has been in line with the underlying business’ progress.

See our latest analysis for MAX Automation

Because MAX Automation 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. 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 3 years MAX Automation saw its revenue grow at 3.6% per year. Considering the company is losing money, we think that rate of revenue growth is uninspiring. In that time the share price is up 13% per year, which is not unreasonable given the revenue growth. Ultimately, the important thing is whether the company is trending to profitability. 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 graphic below depicts how earnings and revenue have changed over time (unveil the exact values by clicking on the image).

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.

MAX Automation shareholders are up 8.8% for the year. Unfortunately this falls short of the market return. The silver lining is that the gain was actually better than the average annual return of 7% per year over five year. This suggests the company might be improving over time. You could get a better understanding of MAX Automation’s growth by checking out this more detailed historical graph of earnings, revenue and cash flow.

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 German 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.