Sai MicroElectronics Inc. (SZSE:300456) shareholders might be concerned after seeing the share price drop 12% in the last month. On the other hand the returns over the last half decade have not been bad. It's good to see the share price is up 35% in that time, better than its market return of 31%.

While the stock has fallen 4.2% this week, it's worth focusing on the longer term and seeing if the stocks historical returns have been driven by the underlying fundamentals.

Because Sai MicroElectronics 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. Generally speaking, companies without profits are expected to grow revenue every year, and at a good clip. 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.

For the last half decade, Sai MicroElectronics can boast revenue growth at a rate of 13% per year. That's a pretty good long term growth rate. Revenue has been growing at a reasonable clip, so it's debatable whether the share price growth of 6% full reflects the underlying business growth. If revenue growth can maintain for long enough, it's likely profits will flow. Lack of earnings means you have to project further into the future justify the valuation on the basis of future free cash flow.

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

If you are thinking of buying or selling Sai MicroElectronics stock, you should check out this FREE detailed report on its balance sheet.

A Different Perspective

While the broader market gained around 4.9% in the last year, Sai MicroElectronics shareholders lost 14% (even including dividends). Even the share prices of good stocks drop sometimes, but we want to see improvements in the fundamental metrics of a business, before getting too interested. Longer term investors wouldn't be so upset, since they would have made 6%, each year, over five years. It could be that the recent sell-off is an opportunity, so it may be worth checking the fundamental data for signs of a long term growth trend. 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 Sai MicroElectronics 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.