Xiamen Zhongchuang Environmental Technology Co., Ltd (SZSE:300056) shareholders might understandably be very concerned that the share price has dropped 35% in the last quarter. Looking further back, the stock has generated good profits over five years. It has returned a market beating 19% in that time.

In light of the stock dropping 18% in the past week, we want to investigate the longer term story, and see if fundamentals have been the driver of the company's positive five-year return.

Xiamen Zhongchuang Environmental Technology 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 5 years Xiamen Zhongchuang Environmental Technology saw its revenue shrink by 14% per year. Despite the lack of revenue growth, the stock has returned a respectable 4%, compound, over that time. To us that suggests that there probably isn't a lot of correlation between the past revenue performance and the share price, but a closer look at analyst forecasts and the bottom line may well explain a lot.

The company's revenue and earnings (over time) are depicted in the image below (click to see the exact numbers).

Take a more thorough look at Xiamen Zhongchuang Environmental Technology's financial health with this free report on its balance sheet.

A Different Perspective

It's good to see that Xiamen Zhongchuang Environmental Technology has rewarded shareholders with a total shareholder return of 2.8% in the last twelve months. However, the TSR over five years, coming in at 4% per year, is even more impressive. It's always interesting to track share price performance over the longer term. But to understand Xiamen Zhongchuang Environmental Technology better, we need to consider many other factors. Take risks, for example - Xiamen Zhongchuang Environmental Technology has 2 warning signs (and 1 which makes us a bit uncomfortable) we think you should know about.

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.