This week we saw the SMS Electric Co.,Ltd.Zhengzhou (SZSE:002857) share price climb by 27%. But that doesn't change the fact that the returns over the last year have been less than pleasing. The cold reality is that the stock has dropped 30% in one year, under-performing the market.

While the stock has risen 27% in the past week but long term shareholders are still in the red, let's see what the fundamentals can tell us.

While SMS ElectricLtd.Zhengzhou 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. For shareholders to have confidence a company will grow profits significantly, it must grow revenue.

In the last twelve months, SMS ElectricLtd.Zhengzhou increased its revenue by 68%. That's well above most other pre-profit companies. Given the revenue growth, the share price drop of 30% seems quite harsh. Our sympathies to shareholders who are now underwater. On the bright side, if this company is moving profits in the right direction, top-line growth like that could be an opportunity.

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

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

A Different Perspective

We regret to report that SMS ElectricLtd.Zhengzhou shareholders are down 30% for the year (even including dividends). Unfortunately, that's worse than the broader market decline of 16%. 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 0.7% per year over half a decade. It could be that the recent sell-off is an opportunity, so it may be worth checking the fundamental data for signs of a long term growth trend. I find it very interesting to look at share price over the long term as a proxy for business performance. But to truly gain insight, we need to consider other information, too. Case in point: We've spotted 4 warning signs for SMS ElectricLtd.Zhengzhou you should be aware of, and 2 of them don't sit too well with us.

Of course SMS ElectricLtd.Zhengzhou may not be the best stock to buy. So you may wish to see this free collection of growth stocks.

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.

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