While Baota Industry Co., Ltd. (SZSE:000595) shareholders are probably generally happy, the stock hasn't had particularly good run recently, with the share price falling 19% in the last quarter. But don't let that distract from the very nice return generated over three years. After all, the share price is up a market-beating 50% in that time.
While the stock has fallen 12% this week, it's worth focusing on the longer term and seeing if the stocks historical returns have been driven by the underlying fundamentals.
Given that Baota Industry 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. Generally speaking, companies without profits are expected to grow revenue every year, and at a good clip. As you can imagine, fast revenue growth, when maintained, often leads to fast profit growth.
Baota Industry's revenue trended up 16% each year over three years. That's a very respectable growth rate. The share price gain of 15% per year shows that the market is paying attention to this growth. Of course, valuation is quite sensitive to the rate of growth. Keep in mind that the strength of the balance sheet impacts the options open to the company.
The graphic below depicts how earnings and revenue have changed over time (unveil the exact values by clicking on the image).
It's probably worth noting that the CEO is paid less than the median at similar sized companies. But while CEO remuneration is always worth checking, the really important question is whether the company can grow earnings going forward. Dive deeper into the earnings by checking this interactive graph of Baota Industry's earnings, revenue and cash flow.
A Different Perspective
While the broader market lost about 9.7% in the twelve months, Baota Industry shareholders did even worse, losing 30%. 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 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. You could get a better understanding of Baota Industry's growth by checking out this more detailed historical graph of earnings, revenue and cash flow.
If you would prefer to check out another company -- one with potentially superior financials -- then do not miss this free list of companies that have proven they can grow earnings.
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.