Even though Greatoo Intelligent Equipment (SZSE:002031) has lost CN¥1.8b market cap in last 7 days, shareholders are still up 373% over 3 years

Greatoo Intelligent Equipment Inc. (SZSE:002031) shareholders have seen the share price descend 16% over the month. But that doesn't change the fact that the returns over the last three years have been spectacular. Indeed, the share price is up a whopping 373% in that time. 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.

Since the long term performance has been good but there's been a recent pullback of 8.7%, let's check if the fundamentals match the share price.

Greatoo Intelligent Equipment 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. That's because it's hard to be confident a company will be sustainable if revenue growth is negligible, and it never makes a profit.

In the last 3 years Greatoo Intelligent Equipment saw its revenue shrink by 35% per year. This is in stark contrast to the strong share price growth of 68%, compound, per year. 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).

It's probably worth noting that the CEO is paid less than the median at similar sized companies. But while CEO remuneration is always worth checking, the really important question is whether the company can grow earnings going forward. It might be well worthwhile taking a look at our free report on Greatoo Intelligent Equipment's earnings, revenue and cash flow.

A Different Perspective

It's nice to see that Greatoo Intelligent Equipment shareholders have received a total shareholder return of 149% over the last year. That gain is better than the annual TSR over five years, which is 36%. 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. 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 - Greatoo Intelligent Equipment has 3 warning signs we think you should be aware of.

For those who like to find winning investments this free list of undervalued companies with recent insider purchasing, could be just the ticket.

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.