While not a mind-blowing move, it is good to see that the Rongsheng Petrochemical Co., Ltd. (SZSE:002493) share price has gained 12% in the last three months. But that doesn't change the fact that the returns over the last three years have been less than pleasing. In fact, the share price is down 42% in the last three years, falling well short of the market return.

With the stock having lost 3.7% in the past week, it's worth taking a look at business performance and seeing if there's any red flags.

To paraphrase Benjamin Graham: Over the short term the market is a voting machine, but over the long term it's a weighing machine. One imperfect but simple way to consider how the market perception of a company has shifted is to compare the change in the earnings per share (EPS) with the share price movement.

Rongsheng Petrochemical became profitable within the last five years. That would generally be considered a positive, so we are surprised to see the share price is down. So it's worth looking at other metrics to try to understand the share price move.

With a rather small yield of just 1.0% we doubt that the stock's share price is based on its dividend. Revenue is actually up 20% over the three years, so the share price drop doesn't seem to hinge on revenue, either. This analysis is just perfunctory, but it might be worth researching Rongsheng Petrochemical more closely, as sometimes stocks fall unfairly. This could present an opportunity.

You can see below how earnings and revenue have changed over time (discover the exact values by clicking on the image).

We know that Rongsheng Petrochemical has improved its bottom line lately, but what does the future have in store? So we recommend checking out this free report showing consensus forecasts

A Different Perspective

While the broader market gained around 4.2% in the last year, Rongsheng Petrochemical shareholders lost 9.7% (even including dividends). However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. Longer term investors wouldn't be so upset, since they would have made 4%, each year, over five years. If the fundamental data continues to indicate long term sustainable growth, the current sell-off could be an opportunity worth considering. It's always interesting to track share price performance over the longer term. But to understand Rongsheng Petrochemical better, we need to consider many other factors. Like risks, for instance. Every company has them, and we've spotted 2 warning signs for Rongsheng Petrochemical (of which 1 makes us a bit uncomfortable!) 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.