It might seem bad, but the worst that can happen when you buy a stock (without leverage) is that its share price goes to zero. But if you buy shares in a really great company, you can more than double your money. For example, the Gansu Dunhuang Seed Group Co.,Ltd. (SHSE:600354) share price has soared 134% in the last three years. That sort of return is as solid as granite. Also pleasing for shareholders was the 30% gain in the last three months.
Since the stock has added CN¥449m to its market cap in the past week alone, let's see if underlying performance has been driving long-term returns.
See our latest analysis for Gansu Dunhuang Seed GroupLtd
Gansu Dunhuang Seed GroupLtd 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. When a company doesn't make profits, we'd generally expect to see good revenue growth. That's because fast revenue growth can be easily extrapolated to forecast profits, often of considerable size.
Gansu Dunhuang Seed GroupLtd actually saw its revenue drop by 11% per year over three years. So we wouldn't have expected the share price to gain 33% per year, but it has. It's fair to say shareholders are definitely counting on a bright future.
The image below shows how earnings and revenue have tracked over time (if you click on the image you can see greater detail).
It's probably worth noting that the CEO is paid less than the median at similar sized companies. It's always worth keeping an eye on CEO pay, but a more important question is whether the company will grow earnings throughout the years. Dive deeper into the earnings by checking this interactive graph of Gansu Dunhuang Seed GroupLtd's earnings, revenue and cash flow.
A Different Perspective
We're pleased to report that Gansu Dunhuang Seed GroupLtd shareholders have received a total shareholder return of 49% over one year. That gain is better than the annual TSR over five years, which is 5%. Therefore it seems like sentiment around the company has been positive lately. Given the share price momentum remains strong, it might be worth taking a closer look at the stock, lest you miss an opportunity. While it is well worth considering the different impacts that market conditions can have on the share price, there are other factors that are even more important. To that end, you should be aware of the 1 warning sign we've spotted with Gansu Dunhuang Seed GroupLtd .
We will like Gansu Dunhuang Seed GroupLtd better if we see some big insider buys. While we wait, check out this free list of growing companies 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 CN 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.