Despite currently being unprofitable, Xiamen Zhongchuang Environmental Technology (SZSE:300056) has delivered a 104% return to shareholders over 5 years

When you buy shares in a company, it's worth keeping in mind the possibility that it could fail, and you could lose your money. But on the bright side, if you buy shares in a high quality company at the right price, you can gain well over 100%. For instance, the price of Xiamen Zhongchuang Environmental Technology Co., Ltd (SZSE:300056) stock is up an impressive 104% over the last five years. It's also good to see the share price up 36% over the last quarter. But this move may well have been assisted by the reasonably buoyant market (up 18% in 90 days).

Since the long term performance has been good but there's been a recent pullback of 9.2%, let's check if the fundamentals match the share price.

See our latest analysis for Xiamen Zhongchuang Environmental Technology

Given that Xiamen Zhongchuang Environmental Technology 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. Some companies are willing to postpone profitability to grow revenue faster, but in that case one would hope for good top-line growth to make up for the lack of earnings.

In the last 5 years Xiamen Zhongchuang Environmental Technology saw its revenue shrink by 24% per year. On the other hand, the share price done the opposite, gaining 15%, compound, each year. It's a good reminder that expectations about the future, not the past history, always impact share prices. Still, we are a bit cautious in this kind of situation.

You can see below how earnings and revenue have changed over time (discover the exact values by clicking on the image).

We're pleased to report that the CEO is remunerated more modestly than most CEOs at similarly capitalized 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 Xiamen Zhongchuang Environmental Technology's earnings, revenue and cash flow.

A Different Perspective

We're pleased to report that Xiamen Zhongchuang Environmental Technology shareholders have received a total shareholder return of 60% over one year. That gain is better than the annual TSR over five years, which is 15%. Therefore it seems like sentiment around the company has been positive lately. In the best case scenario, this may hint at some real business momentum, implying that now could be a great time to delve deeper. It's always interesting to track share price performance over the longer term. But to understand Xiamen Zhongchuang Environmental Technology better, we need to consider many other factors. For example, we've discovered 2 warning signs for Xiamen Zhongchuang Environmental Technology that you should be aware of before investing here.

We will like Xiamen Zhongchuang Environmental Technology better if we see some big insider buys. While we wait, check out this free list of undervalued stocks (mostly small caps) 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 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.