Shenzhen Ecobeauty (SZSE:000010) adds CN¥391m to market cap in the past 7 days, though investors from three years ago are still down 22%

It is a pleasure to report that the Shenzhen Ecobeauty Co., Ltd. (SZSE:000010) is up 55% in the last quarter. But that doesn't help the fact that the three year return is less impressive. In fact, the share price is down 22% in the last three years, falling well short of the market return.

Although the past week has been more reassuring for shareholders, they're still in the red over the last three years, so let's see if the underlying business has been responsible for the decline.

Check out our latest analysis for Shenzhen Ecobeauty

Shenzhen Ecobeauty 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 hope to see good 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 the last three years, Shenzhen Ecobeauty's revenue dropped 71% per year. That means its revenue trend is very weak compared to other loss making companies. With revenue in decline, the share price decline of 7% per year is hardly undeserved. It would probably be worth asking whether the company can fund itself to profitability. The company will need to return to revenue growth as quickly as possible, if it wants to see some enthusiasm from investors.

The image below shows how earnings and revenue have tracked over time (if you click on the image you can see greater detail).

If you are thinking of buying or selling Shenzhen Ecobeauty stock, you should check out this FREE detailed report on its balance sheet.

A Different Perspective

Investors in Shenzhen Ecobeauty had a tough year, with a total loss of 13%, against a market gain of about 7.9%. Even the share prices of good stocks drop sometimes, but we want to see improvements in the fundamental metrics of a business, before getting too interested. Unfortunately, last year's performance may indicate unresolved challenges, given that it was worse than the annualised loss of 3% over the last half decade. Generally speaking long term share price weakness can be a bad sign, though contrarian investors might want to research the stock in hope of a turnaround. 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. Case in point: We've spotted 3 warning signs for Shenzhen Ecobeauty you should be aware of, and 2 of them are a bit unpleasant.

But note: Shenzhen Ecobeauty 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.