Tianyu Digital Technology (Dalian) Group Co., Ltd. (SZSE:002354) shareholders might be concerned after seeing the share price drop 22% in the last month. But that doesn't change the fact that the returns over the last five years have been pleasing. After all, the share price is up a market-beating 60% in that time.

While the stock has fallen 17% this week, it's worth focusing on the longer term and seeing if the stocks historical returns have been driven by the underlying fundamentals.

Tianyu Digital Technology (Dalian) Group 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. Generally speaking, companies without profits are expected to grow revenue every year, and at a good clip. That's because fast revenue growth can be easily extrapolated to forecast profits, often of considerable size.

In the last 5 years Tianyu Digital Technology (Dalian) Group saw its revenue grow at 8.0% per year. That's a fairly respectable growth rate. Revenue has been growing at a reasonable clip, so it's debatable whether the share price growth of 10% full reflects the underlying business growth. The key question is whether revenue growth will slow down, and if so, how quickly. There's no doubt that it can be difficult to value pre-profit companies.

The image below shows how earnings and revenue have tracked over time (if you click on the image you can see greater detail).

If you are thinking of buying or selling Tianyu Digital Technology (Dalian) Group stock, you should check out this FREE detailed report on its balance sheet.

A Different Perspective

Tianyu Digital Technology (Dalian) Group shareholders are down 19% for the year, but the market itself is up 6.1%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. On the bright side, long term shareholders have made money, with a gain of 10% per year over half a decade. 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 Tianyu Digital Technology (Dalian) Group better, we need to consider many other factors. Even so, be aware that Tianyu Digital Technology (Dalian) Group is showing 1 warning sign in our investment analysis , you should know about...

But note: Tianyu Digital Technology (Dalian) Group 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.

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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.