The Hainan Shuangcheng Pharmaceuticals Co., Ltd. (SZSE:002693) share price is down a rather concerning 36% in the last month. But that doesn't change the fact that the returns over the last three years have been spectacular. The longer term view reveals that the share price is up 471% in that period. So the recent fall doesn't do much to dampen our respect for the business. The only way to form a view of whether the current price is justified is to consider the merits of the business itself.

Although Hainan Shuangcheng Pharmaceuticals has shed CN¥1.4b from its market cap this week, let's take a look at its longer term fundamental trends and see if they've driven returns.

Given that Hainan Shuangcheng Pharmaceuticals didn't make a profit in the last twelve months, we'll focus on revenue growth to form a quick view of its business development. When a company doesn't make profits, we'd generally hope to see good revenue growth. That's because fast revenue growth can be easily extrapolated to forecast profits, often of considerable size.

Hainan Shuangcheng Pharmaceuticals actually saw its revenue drop by 18% per year over three years. So it's pretty amazing to see the stock price has zoomed up 79% per year in that time. This clear lack of correlation between revenue and share price is surprising to see in a money losing company. So there is a serious possibility that some holders are counting their chickens before they hatch.

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

Take a more thorough look at Hainan Shuangcheng Pharmaceuticals' financial health with this free report on its balance sheet.

A Different Perspective

We're pleased to report that Hainan Shuangcheng Pharmaceuticals shareholders have received a total shareholder return of 223% over one year. That's better than the annualised return of 40% over half a decade, implying that the company is doing better recently. Given the share price momentum remains strong, it might be worth taking a closer look at the stock, lest you miss an opportunity. 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. Take risks, for example - Hainan Shuangcheng Pharmaceuticals has 2 warning signs we think you should be aware of.

We will like Hainan Shuangcheng Pharmaceuticals better if we see some big insider buys. While we wait, check out this free list of undervalued stocks (mostly small caps) with considerable, recent, insider buying.

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.