It is doubtless a positive to see that the Shanghai Xinnanyang Only Education & Technology Co.,Ltd (SHSE:600661) share price has gained some 46% in the last three months. But if you look at the last five years the returns have not been good. You would have done a lot better buying an index fund, since the stock has dropped 46% in that half decade.

On a more encouraging note the company has added CN¥444m to its market cap in just the last 7 days, so let's see if we can determine what's driven the five-year loss for shareholders.

Shanghai Xinnanyang Only Education & TechnologyLtd 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 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 five years Shanghai Xinnanyang Only Education & TechnologyLtd saw its revenue shrink by 23% per year. That's definitely a weaker result than most pre-profit companies report. On the face of it we'd posit the share price fall of 8% compound, over five years is well justified by the fundamental deterioration. We doubt many shareholders are delighted with this share price performance. It is possible for businesses to bounce back but as Buffett says, 'turnarounds seldom turn'.

You can see below how earnings and revenue have changed over time (discover 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.

A Different Perspective

It's nice to see that Shanghai Xinnanyang Only Education & TechnologyLtd shareholders have received a total shareholder return of 18% over the last year. That certainly beats the loss of about 8% per year over the last half decade. We generally put more weight on the long term performance over the short term, but the recent improvement could hint at a (positive) inflection point within the business. While it is well worth considering the different impacts that market conditions can have on the share price, there are other factors that are even more important. For example, we've discovered 1 warning sign for Shanghai Xinnanyang Only Education & TechnologyLtd that you should be aware of before investing here.

For those who like to find winning investments this free list of growing 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 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.