China Railway Prefabricated Construction Co., Ltd (SZSE:300374) shareholders might be concerned after seeing the share price drop 13% in the last month. But that doesn't change the fact that the returns over the last five years have been pleasing. After all, the share price is up a market-beating 84% in that time.

While the stock has fallen 11% this week, it's worth focusing on the longer term and seeing if the stocks historical returns have been driven by the underlying fundamentals.

China Railway Prefabricated Construction isn't currently profitable, so most analysts would look to revenue growth to get an idea of how fast the underlying business is growing. When a company doesn't make profits, we'd generally hope to see good revenue growth. As you can imagine, fast revenue growth, when maintained, often leads to fast profit growth.

In the last 5 years China Railway Prefabricated Construction saw its revenue grow at 14% per year. That's a fairly respectable growth rate. Revenue has been growing at a reasonable clip, so it's debatable whether the share price growth of 13% full reflects the underlying business growth. If revenue growth can maintain for long enough, it's likely profits will flow. There's no doubt that it can be difficult to value pre-profit companies.

The image below shows how earnings and revenue have tracked over time (if you click on the image you can see greater detail).

Take a more thorough look at China Railway Prefabricated Construction's financial health with this free report on its balance sheet.

A Different Perspective

We're pleased to report that China Railway Prefabricated Construction shareholders have received a total shareholder return of 46% over one year. That gain is better than the annual TSR over five years, which is 13%. Therefore it seems like sentiment around the company has been positive lately. Given the share price momentum remains strong, it might be worth taking a closer look at the stock, lest you miss an opportunity. 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. Consider for instance, the ever-present spectre of investment risk. We've identified 1 warning sign with China Railway Prefabricated Construction , and understanding them should be part of your investment process.

Of course China Railway Prefabricated Construction 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.