It's nice to see the Shanghai Kinlita Chemical Co., Ltd. (SZSE:300225) share price up 21% in a week. But that doesn't change the fact that the returns over the last three years have been stomach churning. The share price has sunk like a leaky ship, down 72% in that time. So it sure is nice to see a bit of an improvement. The thing to think about is whether the business has really turned around.
Although the past week has been more reassuring for shareholders, they're still in the red over the last three years, so let's see if the underlying business has been responsible for the decline.
Shanghai Kinlita Chemical isn't currently profitable, so most analysts would look to revenue growth to get an idea of how fast the underlying business is growing. Generally speaking, companies without profits are expected to grow revenue every year, and at a good clip. That's because it's hard to be confident a company will be sustainable if revenue growth is negligible, and it never makes a profit.
Over the last three years, Shanghai Kinlita Chemical's revenue dropped 15% per year. That means its revenue trend is very weak compared to other loss making companies. And as you might expect the share price has been weak too, dropping at a rate of 20% per year. We prefer leave it to clowns to try to catch falling knives, like this stock. There is a good reason that investors often describe buying a sharply falling stock price as 'trying to catch a falling knife'. Think about it.
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 Shanghai Kinlita Chemical's balance sheet strength is a great place to start, if you want to investigate the stock further.
A Different Perspective
We're pleased to report that Shanghai Kinlita Chemical shareholders have received a total shareholder return of 6.9% over one year. Since the one-year TSR is better than the five-year TSR (the latter coming in at 1.0% per year), it would seem that the stock's performance has improved in recent times. In the best case scenario, this may hint at some real business momentum, implying that now could be a great time to delve deeper. It's always interesting to track share price performance over the longer term. But to understand Shanghai Kinlita Chemical better, we need to consider many other factors. Even so, be aware that Shanghai Kinlita Chemical is showing 2 warning signs in our investment analysis , you should know about...
We will like Shanghai Kinlita Chemical better if we see some big insider buys. While we wait, check out this free list of growing companies with considerable, recent, insider buying.
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.