Some Shandong Fengyuan Chemical Co., Ltd. (SZSE:002805) shareholders are probably rather concerned to see the share price fall 33% over the last three months. On the bright side the returns have been quite good over the last half decade. Its return of 93% has certainly bested the market return! While the long term returns are impressive, we do have some sympathy for those who bought more recently, given the 62% drop, in the last year.
While this past week has detracted from the company's five-year return, let's look at the recent trends of the underlying business and see if the gains have been in alignment.
Check out our latest analysis for Shandong Fengyuan Chemical
Because Shandong Fengyuan Chemical made a loss in the last twelve months, we think the market is probably more focussed on revenue and revenue growth, at least for now. Generally speaking, companies without profits are expected to grow revenue every year, and at a good clip. Some companies are willing to postpone profitability to grow revenue faster, but in that case one does expect good top-line growth.
In the last 5 years Shandong Fengyuan Chemical saw its revenue grow at 49% per year. That's well above most pre-profit companies. While the compound gain of 14% per year is good, it's not unreasonable given the strong revenue growth. If you think there could be more growth to come, now might be the time to take a close look at Shandong Fengyuan Chemical. Of course, you'll have to research the business more fully to figure out if this is an attractive opportunity.
You can see how earnings and revenue have changed over time in the image below (click on the chart to see the exact values).
It's probably worth noting that the CEO is paid less than the median at similar sized 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. This free interactive report on Shandong Fengyuan Chemical's earnings, revenue and cash flow is a great place to start, if you want to investigate the stock further.
A Different Perspective
We regret to report that Shandong Fengyuan Chemical shareholders are down 62% for the year (even including dividends). Unfortunately, that's worse than the broader market decline of 20%. 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 14% 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. For instance, we've identified 2 warning signs for Shandong Fengyuan Chemical (1 shouldn't be ignored) that you should be aware of.
For those who like to find winning investments this free list of growing companies with recent insider purchasing, could be just the ticket.
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.