Investors can approximate the average market return by buying an index fund. While individual stocks can be big winners, plenty more fail to generate satisfactory returns. Unfortunately the Shandong Fengyuan Chemical Co., Ltd. (SZSE:002805) share price slid 50% over twelve months. That's well below the market decline of 12%. Even if you look out three years, the returns are still disappointing, with the share price down31% in that time. Even worse, it's down 15% in about a month, which isn't fun at all.

If the past week is anything to go by, investor sentiment for Shandong Fengyuan Chemical isn't positive, so let's see if there's a mismatch between fundamentals and the share price.

Shandong Fengyuan Chemical 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 just one year Shandong Fengyuan Chemical saw its revenue fall by 10%. That looks pretty grim, at a glance. The stock price has languished lately, falling 50% in a year. What would you expect when revenue is falling, and it doesn't make a profit? We think most holders must believe revenue growth will improve, or else costs will decline.

You can see below how earnings and revenue have changed over time (discover the exact values by clicking on the image).

We're pleased to report that the CEO is remunerated more modestly than most CEOs at similarly capitalized companies. It's always worth keeping an eye on CEO pay, but a more important question is whether the company will grow earnings throughout the years. It might be well worthwhile taking a look at our free report on Shandong Fengyuan Chemical's earnings, revenue and cash flow.

A Different Perspective

While the broader market lost about 12% in the twelve months, Shandong Fengyuan Chemical shareholders did even worse, losing 50%. However, it could simply be that the share price has been impacted by broader market jitters. It might be worth keeping an eye on the fundamentals, in case there's a good opportunity. On the bright side, long term shareholders have made money, with a gain of 2% per year over half a decade. If the fundamental data continues to indicate long term sustainable growth, the current sell-off could be an opportunity worth considering. 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 3 warning signs for Shandong Fengyuan Chemical that you should be aware of before investing here.

We will like Shandong Fengyuan Chemical better if we see some big insider buys. While we wait, check out this free list of undervalued stocks (mostly small caps) with considerable, recent, insider buying.

Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on Chinese exchanges.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.
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.