Some Tongyi Carbon Neutral Technology (Xinjiang) Co., Ltd (SHSE:600506) shareholders are probably rather concerned to see the share price fall 31% over the last three months. But over three years, the returns would have left most investors smiling After all, the share price is up a market-beating 33% in that time.
Since the stock has added CN¥417m to its market cap in the past week alone, let's see if underlying performance has been driving long-term returns.
Tongyi Carbon Neutral Technology (Xinjiang) isn't currently profitable, so most analysts would look to revenue growth to get an idea of how fast the underlying business is growing. When a company doesn't make profits, we'd generally expect to see good revenue growth. Some companies are willing to postpone profitability to grow revenue faster, but in that case one does expect good top-line growth.
Over the last three years Tongyi Carbon Neutral Technology (Xinjiang) has grown its revenue at 84% annually. That's well above most pre-profit companies. While the compound gain of 10% per year over three years is pretty good, you might argue it doesn't fully reflect the strong revenue growth. If that's the case, now might be the time to take a close look at Tongyi Carbon Neutral Technology (Xinjiang). If the company is trending towards profitability then it could be very interesting.
You can see below how earnings and revenue have changed over time (discover the exact values by clicking on the image).
You can see how its balance sheet has strengthened (or weakened) over time in this free interactive graphic.
A Different Perspective
While it's certainly disappointing to see that Tongyi Carbon Neutral Technology (Xinjiang) shares lost 12% throughout the year, that wasn't as bad as the market loss of 20%. Unfortunately, last year's performance may indicate unresolved challenges, given that it's worse than the annualised loss of 1.6% over the last half decade. While some investors do well specializing in buying companies that are struggling (but nonetheless undervalued), don't forget that Buffett said that 'turnarounds seldom turn'. 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. To that end, you should be aware of the 2 warning signs we've spotted with Tongyi Carbon Neutral Technology (Xinjiang) .
But note: Tongyi Carbon Neutral Technology (Xinjiang) 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.