It might be of some concern to shareholders to see the Ledman Optoelectronic Co., Ltd. (SZSE:300162) share price down 18% in the last month. But at least the stock is up over the last five years. In that time, it is up 27%, which isn't bad, but is below the market return of 33%.

While this past week has detracted from the company's five-year return, let's look at the recent trends of the underlying business and see if the gains have been in alignment.

See our latest analysis for Ledman Optoelectronic

Ledman Optoelectronic wasn't profitable in the last twelve months, it is unlikely we'll see a strong correlation between its share price and its earnings per share (EPS). Arguably revenue is our next best option. 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.

In the last 5 years Ledman Optoelectronic saw its revenue grow at 8.9% per year. That's a pretty good long term growth rate. While the share price has beat the market, compounding at 5% yearly, over five years, there's certainly some potential that the market hasn't fully considered the growth track record. The key question is whether revenue growth will slow down, and if so, how quickly. There's no doubt that it can be difficult to value pre-profit companies.

You can see how earnings and revenue have changed over time in the image below (click on the chart to see the exact values).

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

Although it hurts that Ledman Optoelectronic returned a loss of 9.3% in the last twelve months, the broader market was actually worse, returning a loss of 20%. Of course, the long term returns are far more important and the good news is that over five years, the stock has returned 5% for each year. It could be that the business is just facing some short term problems, but shareholders should keep a close eye on the fundamentals. 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. Consider for instance, the ever-present spectre of investment risk. We've identified 2 warning signs with Ledman Optoelectronic , and understanding them should be part of your investment process.

Of course Ledman Optoelectronic may not be the best stock to buy. So you may wish to see this free collection of growth stocks.

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.