Renrenle Commercial Group Co.,Ltd. (SZSE:002336) shareholders have seen the share price descend 10% over the month. But that doesn't change the fact that the returns over the last three years have been very strong. In fact, the share price is up a full 136% compared to three years ago. It's not uncommon to see a share price retrace a bit, after a big gain. The thing to consider is whether the underlying business is doing well enough to support the current price.

Since the long term performance has been good but there's been a recent pullback of 9.3%, let's check if the fundamentals match the share price.

See our latest analysis for Renrenle Commercial GroupLtd

Given that Renrenle Commercial GroupLtd didn't make a profit in the last twelve months, we'll focus on revenue growth to form a quick view of its business development. When a company doesn't make profits, we'd generally expect to see good 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.

Renrenle Commercial GroupLtd actually saw its revenue drop by 20% per year over three years. So we wouldn't have expected the share price to gain 33% per year, but it has. It's a good reminder that expectations about the future, not the past history, always impact share prices.

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

This free interactive report on Renrenle Commercial GroupLtd's balance sheet strength is a great place to start, if you want to investigate the stock further.

A Different Perspective

It's nice to see that Renrenle Commercial GroupLtd shareholders have received a total shareholder return of 122% over the last year. That gain is better than the annual TSR over five years, which is 5%. Therefore it seems like sentiment around the company has been positive lately. In the best case scenario, this may hint at some real business momentum, implying that now could be a great time to delve deeper. 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. Take risks, for example - Renrenle Commercial GroupLtd has 2 warning signs (and 1 which is a bit unpleasant) we think you should know about.

If you like to buy stocks alongside management, then you might just love this free list of companies. (Hint: insiders have been buying them).

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.