One simple way to benefit from a rising market is to buy an index fund. In contrast individual stocks will provide a wide range of possible returns, and may fall short. Unfortunately, that's been the case for longer term Xiangcai Co.,Ltd (SHSE:600095) shareholders, since the share price is down 34% in the last three years, less than the market decline of around 27%. And the ride hasn't got any smoother in recent times over the last year, with the price 31% lower in that time.

While the stock has risen 4.3% in the past week but long term shareholders are still in the red, let's see what the fundamentals can tell us.

Given that XiangcaiLtd only made minimal earnings in the last twelve months, we'll focus on revenue to gauge its business development. As a general rule, we think this kind of company is more comparable to loss-making stocks, since the actual profit is so low. For shareholders to have confidence a company will grow profits significantly, it must grow revenue.

Over the last three years, XiangcaiLtd's revenue dropped 24% per year. That means its revenue trend is very weak compared to other loss making companies. On the face of it we'd posit the share price fall of 10% compound, over three years is well justified by the fundamental deterioration. It would probably be worth asking whether the company can fund itself to profitability. Of course, it is possible for businesses to bounce back from a revenue drop - but we'd want to see that before getting interested.

The graphic below depicts how earnings and revenue have changed over time (unveil the exact values by clicking on the image).

We know that XiangcaiLtd has improved its bottom line lately, but what does the future have in store? So it makes a lot of sense to check out what analysts think XiangcaiLtd will earn in the future (free profit forecasts).

What About Dividends?

When looking at investment returns, it is important to consider the difference between total shareholder return (TSR) and share price return. The TSR is a return calculation that accounts for the value of cash dividends (assuming that any dividend received was reinvested) and the calculated value of any discounted capital raisings and spin-offs. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. As it happens, XiangcaiLtd's TSR for the last 3 years was -32%, which exceeds the share price return mentioned earlier. This is largely a result of its dividend payments!

A Different Perspective

We regret to report that XiangcaiLtd shareholders are down 31% for the year (even including dividends). Unfortunately, that's worse than the broader market decline of 19%. 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. Regrettably, last year's performance caps off a bad run, with the shareholders facing a total loss of 2% per year over five years. Generally speaking long term share price weakness can be a bad sign, though contrarian investors might want to research the stock in hope of a turnaround. 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. Case in point: We've spotted 1 warning sign for XiangcaiLtd you should be aware of.

Of course XiangcaiLtd 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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com