While some are satisfied with an index fund, active investors aim to find truly magnificent investments on the stock market. When you buy and hold the right company, the returns can make a huge difference to both you and your family. In the case of GDS Holdings Limited (NASDAQ:GDS), the share price is up an incredible 578% in the last year alone. Also pleasing for shareholders was the 165% gain in the last three months. The longer term returns have not been as good, with the stock price only 9.2% higher than it was three years ago. Anyone who held for that rewarding ride would probably be keen to talk about it.

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

See our latest analysis for GDS Holdings

Because GDS 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. When a company doesn't make profits, we'd generally hope to see good revenue growth. As you can imagine, fast revenue growth, when maintained, often leads to fast profit growth.

GDS Holdings grew its revenue by 12% last year. That's not a very high growth rate considering it doesn't make profits. So it's truly surprising that the share price rocketed 578% in a single year. It's great to see that some have made big profits, but we aren't so sure that the increase is justified. This is an example of the huge profits some lucky shareholders occasionally make on growth stocks.

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

GDS Holdings is well known by investors, and plenty of clever analysts have tried to predict the future profit levels. If you are thinking of buying or selling GDS Holdings stock, you should check out this free report showing analyst consensus estimates for future profits.

A Different Perspective

It's good to see that GDS Holdings has rewarded shareholders with a total shareholder return of 578% in the last twelve months. There's no doubt those recent returns are much better than the TSR loss of 3% per year over five years. This makes us a little wary, but the business might have turned around its fortunes. It's always interesting to track share price performance over the longer term. But to understand GDS Holdings better, we need to consider many other factors. Consider for instance, the ever-present spectre of investment risk. We've identified 1 warning sign with GDS Holdings , and understanding them should be part of your investment process.

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 American 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.