This week we saw the Fujian Cosunter Pharmaceutical Co., Ltd. (SZSE:300436) share price climb by 20%. But over the last three years we've seen a quite serious decline. In that time, the share price dropped 50%. So it is really good to see an improvement. The rise has some hopeful, but turnarounds are often precarious.
On a more encouraging note the company has added CN¥470m to its market cap in just the last 7 days, so let's see if we can determine what's driven the three-year loss for shareholders.
Fujian Cosunter Pharmaceutical 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. Some companies are willing to postpone profitability to grow revenue faster, but in that case one would hope for good top-line growth to make up for the lack of earnings.
In the last three years, Fujian Cosunter Pharmaceutical saw its revenue grow by 4.1% per year, compound. That's not a very high growth rate considering it doesn't make profits. It's likely this weak growth has contributed to an annualised return of 15% for the last three years. When a stock falls hard like this, some investors like to add the company to a watchlist (in case the business recovers, longer term). Keep in mind it isn't unusual for good businesses to have a tough time or a couple of uninspiring years.
The graphic below depicts how earnings and revenue have changed over time (unveil the exact values by clicking on the image).
You can see how its balance sheet has strengthened (or weakened) over time in this free interactive graphic.
A Different Perspective
While the broader market lost about 20% in the twelve months, Fujian Cosunter Pharmaceutical shareholders did even worse, losing 33%. Having said that, it's inevitable that some stocks will be oversold in a falling market. The key is to keep your eyes on the fundamental developments. Unfortunately, last year's performance may indicate unresolved challenges, given that it was worse than the annualised loss of 8% over the last half decade. 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. It's always interesting to track share price performance over the longer term. But to understand Fujian Cosunter Pharmaceutical better, we need to consider many other factors. Take risks, for example - Fujian Cosunter Pharmaceutical has 2 warning signs we think you should be aware of.
Of course, you might find a fantastic investment by looking elsewhere. So take a peek at this free list of companies we expect will 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.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com