It's nice to see the Henan Yicheng New Energy Co., Ltd. (SZSE:300080) share price up 18% in a week. But that is small recompense for the exasperating returns over three years. Indeed, the share price is down a tragic 56% in the last three years. Some might say the recent bounce is to be expected after such a bad drop. While many would remain nervous, there could be further gains if the business can put its best foot forward.

On a more encouraging note the company has added CN¥899m 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.

Because Henan Yicheng New Energy made a loss in the last twelve months, we think the market is probably more focussed on revenue and revenue growth, at least for now. When a company doesn't make profits, we'd generally hope to see good revenue growth. 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.

In the last three years, Henan Yicheng New Energy saw its revenue grow by 17% per year, compound. That's a pretty good rate of top-line growth. So some shareholders would be frustrated with the compound loss of 16% per year. The market must have had really high expectations to be disappointed with this progress. It would be well worth taking a closer look at the company, to determine growth trends (and balance sheet strength).

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 Henan Yicheng New Energy's financial health with this free report on its balance sheet.

A Different Perspective

We regret to report that Henan Yicheng New Energy shareholders are down 36% for the year. 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. 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. We realise that Baron Rothschild has said investors should "buy when there is blood on the streets", but we caution that investors should first be sure they are buying a high quality business. 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. Case in point: We've spotted 2 warning signs for Henan Yicheng New Energy you should be aware of, and 1 of them is significant.

But note: Henan Yicheng New Energy may not be the best stock to buy. So take a peek at this free list of interesting companies with past earnings growth (and further growth forecast).

Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on Chinese exchanges.

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