When you buy shares in a company, there is always a risk that the price drops to zero. But if you pick the right business to buy shares in, you can make more than you can lose. For example, the Qingdao Kingking Applied Chemistry Co., Ltd. (SZSE:002094) share price has soared 170% in the last 1 year. Most would be very happy with that, especially in just one year! It's up an even more impressive 406% over the last quarter. This could be related to the recent financial results, released recently - you can catch up on the most recent data by reading our company report. Also impressive, the stock is up 164% over three years, making long term shareholders happy, too.

The past week has proven to be lucrative for Qingdao Kingking Applied Chemistry investors, so let's see if fundamentals drove the company's one-year performance.

Given that Qingdao Kingking Applied Chemistry only made minimal earnings in the last twelve months, we'll focus on revenue to gauge its business development. Generally speaking, we'd consider a stock like this alongside loss-making companies, simply because the quantum of the profit is so low. For shareholders to have confidence a company will grow profits significantly, it must grow revenue.

In the last year Qingdao Kingking Applied Chemistry saw its revenue shrink by 45%. So we would not have expected the share price to rise 170%. It just goes to show the market doesn't always pay attention to the reported numbers. It's quite likely the revenue fall was already priced in, anyway.

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

We're pleased to report that the CEO is remunerated more modestly than most CEOs at similarly capitalized companies. But while CEO remuneration is always worth checking, the really important question is whether the company can grow earnings going forward. Dive deeper into the earnings by checking this interactive graph of Qingdao Kingking Applied Chemistry's earnings, revenue and cash flow.

A Different Perspective

It's good to see that Qingdao Kingking Applied Chemistry has rewarded shareholders with a total shareholder return of 170% in the last twelve months. Since the one-year TSR is better than the five-year TSR (the latter coming in at 16% per year), it would seem that the stock's performance has improved in recent times. Someone with an optimistic perspective could view the recent improvement in TSR as indicating that the business itself is getting better with time. 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 instance, we've identified 2 warning signs for Qingdao Kingking Applied Chemistry that you should be aware of.

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 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.