Shenzhen Magic Design & Decoration Engineering (SZSE:002856) shareholders are up 14% this past week, but still in the red over the last five years

Shenzhen Magic Design & Decoration Engineering Co., Ltd. (SZSE:002856) shareholders will doubtless be very grateful to see the share price up 32% in the last month. But that is little comfort to those holding over the last half decade, sitting on a big loss. The share price has failed to impress anyone , down a sizable 52% during that time. So is the recent increase sufficient to restore confidence in the stock? Not yet. However, in the best case scenario (far from fait accompli), this improved performance might be sustained.

On a more encouraging note the company has added CN¥168m to its market cap in just the last 7 days, so let's see if we can determine what's driven the five-year loss for shareholders.

See our latest analysis for Shenzhen Magic Design & Decoration Engineering

Given that Shenzhen Magic Design & Decoration Engineering didn't make a profit in the last twelve months, we'll focus on revenue growth to form a quick view of its business development. 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.

Over five years, Shenzhen Magic Design & Decoration Engineering grew its revenue at 7.8% per year. That's a fairly respectable growth rate. The share price, meanwhile, has fallen 9% compounded, over five years. It seems probably that the business has failed to live up to initial expectations. A pessimistic market can create opportunities.

The graphic below depicts how earnings and revenue have changed over time (unveil the exact values by clicking on the image).

Balance sheet strength is crucial. It might be well worthwhile taking a look at our free report on how its financial position has changed over time.

A Different Perspective

It's good to see that Shenzhen Magic Design & Decoration Engineering has rewarded shareholders with a total shareholder return of 0.9% in the last twelve months. That certainly beats the loss of about 9% per year over the last half decade. We generally put more weight on the long term performance over the short term, but the recent improvement could hint at a (positive) inflection point within the business. 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 - Shenzhen Magic Design & Decoration Engineering has 3 warning signs (and 1 which shouldn't be ignored) we think you should know about.

Of course, you might find a fantastic investment by looking elsewhere. So take a peek at this free list of companies we expect will grow earnings.

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.