While not a mind-blowing move, it is good to see that the Jiangxi Haiyuan Composites Technology Co.,Ltd. (SZSE:002529) share price has gained 13% in the last three months. But the last three years have seen a terrible decline. In that time the share price has melted like a snowball in the desert, down 74%. So we're relieved for long term holders to see a bit of uplift. But the more important question is whether the underlying business can justify a higher price still.

If the past week is anything to go by, investor sentiment for Jiangxi Haiyuan Composites TechnologyLtd isn't positive, so let's see if there's a mismatch between fundamentals and the share price.

Jiangxi Haiyuan Composites TechnologyLtd wasn't profitable in the last twelve months, it is unlikely we'll see a strong correlation between its share price and its earnings per share (EPS). Arguably revenue is our next best option. Shareholders of unprofitable companies usually desire strong revenue growth. As you can imagine, fast revenue growth, when maintained, often leads to fast profit growth.

Over the last three years, Jiangxi Haiyuan Composites TechnologyLtd's revenue dropped 4.2% per year. That is not a good result. Having said that the 20% annualized share price decline highlights the risk of investing in unprofitable companies. This business clearly needs to grow revenues if it is to perform as investors hope. There's no more than a snowball's chance in hell that share price will head back to its old highs, in the short term.

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

This free interactive report on Jiangxi Haiyuan Composites TechnologyLtd's balance sheet strength is a great place to start, if you want to investigate the stock further.

A Different Perspective

Investors in Jiangxi Haiyuan Composites TechnologyLtd had a tough year, with a total loss of 36%, against a market gain of about 11%. 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 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. It's always interesting to track share price performance over the longer term. But to understand Jiangxi Haiyuan Composites TechnologyLtd better, we need to consider many other factors. Case in point: We've spotted 2 warning signs for Jiangxi Haiyuan Composites TechnologyLtd you should be aware of, and 1 of them is a bit unpleasant.

If you are like me, then you will not want to miss this free list of undervalued small caps that insiders are 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.