Shandong Huifa Foodstuff Co.,Ltd. (SHSE:603536) shareholders might be concerned after seeing the share price drop 28% in the last week. But that shouldn't obscure the pleasing returns achieved by shareholders over the last three years. After all, the share price is up a market-beating 81% in that time.

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

While Shandong Huifa FoodstuffLtd made a small profit, in the last year, we think that the market is probably more focussed on the top line growth at the moment. As a general rule, we think this kind of company is more comparable to loss-making stocks, since the actual profit is so low. It would be hard to believe in a more profitable future without growing revenues.

Shandong Huifa FoodstuffLtd's revenue trended up 8.6% each year over three years. That's pretty nice growth. The share price gain of 22% per year shows that the market is paying attention to this growth. Of course, valuation is quite sensitive to the rate of growth. Of course, it's always worth considering funding risks when a company isn't profitable.

The graphic below depicts how earnings and revenue have changed over time (unveil the exact values by clicking on the image).

You can see how its balance sheet has strengthened (or weakened) over time in this free interactive graphic.

A Different Perspective

Investors in Shandong Huifa FoodstuffLtd had a tough year, with a total loss of 13% (including dividends), against a market gain of about 14%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. Unfortunately, last year's performance may indicate unresolved challenges, given that it was worse than the annualised loss of 4% over the last half decade. Generally speaking long term share price weakness can be a bad sign, though contrarian investors might want to research the stock in hope of a turnaround. It's always interesting to track share price performance over the longer term. But to understand Shandong Huifa FoodstuffLtd better, we need to consider many other factors. Case in point: We've spotted 3 warning signs for Shandong Huifa FoodstuffLtd you should be aware of, and 1 of them is potentially serious.

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.