It hasn't been the best quarter for Shenzhen Hemei Group Co.,LTD. (SZSE:002356) shareholders, since the share price has fallen 13% in that time. But that doesn't displace its brilliant performance over three years. In fact, the share price has taken off in that time, up 342%. Arguably, the recent fall is to be expected after such a strong rise. The only way to form a view of whether the current price is justified is to consider the merits of the business itself.

The past week has proven to be lucrative for Shenzhen Hemei GroupLTD investors, so let's see if fundamentals drove the company's three-year performance.

View our latest analysis for Shenzhen Hemei GroupLTD

Given that Shenzhen Hemei 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 fast revenue growth can be easily extrapolated to forecast profits, often of considerable size.

Shenzhen Hemei GroupLTD actually saw its revenue drop by 44% per year over three years. This is in stark contrast to the strong share price growth of 64%, compound, per year. This clear lack of correlation between revenue and share price is surprising to see in a money losing company. So there is a serious possibility that some holders are counting their chickens before they hatch.

You can see how earnings and revenue have changed over time in the image below (click on the chart to see the exact values).

Take a more thorough look at Shenzhen Hemei GroupLTD's financial health with this free report on its balance sheet.

A Different Perspective

We regret to report that Shenzhen Hemei GroupLTD shareholders are down 8.8% for the year. Unfortunately, that's worse than the broader market decline of 2.5%. Having said that, it's inevitable that some stocks will be oversold in a falling market. The key is to keep your eyes on the fundamental developments. However, the loss over the last year isn't as bad as the 8% per annum loss investors have suffered over the last half decade. We'd need to see some sustained improvements in the key metrics before we could muster much enthusiasm. It's always interesting to track share price performance over the longer term. But to understand Shenzhen Hemei GroupLTD better, we need to consider many other factors. Case in point: We've spotted 1 warning sign for Shenzhen Hemei GroupLTD you should be aware of.

Of course Shenzhen Hemei GroupLTD 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.