Beijing Compass Technology Development (SZSE:300803) investors are up 20% in the past week, but earnings have declined over the last three years

The worst result, after buying shares in a company (assuming no leverage), would be if you lose all the money you put in. But when you pick a company that is really flourishing, you can make more than 100%. For example, the Beijing Compass Technology Development Co., Ltd. (SZSE:300803) share price has soared 198% in the last three years. How nice for those who held the stock! Better yet, the share price has gained 222% in the last quarter.

The past week has proven to be lucrative for Beijing Compass Technology Development investors, so let's see if fundamentals drove the company's three-year performance.

Check out our latest analysis for Beijing Compass Technology Development

We don't think that Beijing Compass Technology Development's modest trailing twelve month profit has the market's full attention at the moment. We think revenue is probably a better guide. As a general rule, we think this kind of company is more comparable to loss-making stocks, since the actual profit is so low. For shareholders to have confidence a company will grow profits significantly, it must grow revenue.

In the last 3 years Beijing Compass Technology Development saw its revenue grow at 1.5% per year. Considering the company is losing money, we think that rate of revenue growth is uninspiring. In comparison, the share price rise of 44% per year over the last three years is pretty impressive. We'd need to take a closer look at the revenue and profit trends to see whether the improvements might justify that sort of increase. It seems likely that the market is pretty optimistic about Beijing Compass Technology Development, given it is losing money.

The company's revenue and earnings (over time) are depicted in the image below (click to see the exact numbers).

We know that Beijing Compass Technology Development has improved its bottom line lately, but what does the future have in store? So we recommend checking out this free report showing consensus forecasts

A Different Perspective

It's nice to see that Beijing Compass Technology Development shareholders have received a total shareholder return of 82% over the last year. That's better than the annualised return of 22% over half a decade, implying that the company is doing better recently. Someone with an optimistic perspective could view the recent improvement in TSR as indicating that the business itself is getting better with time. 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. For instance, we've identified 2 warning signs for Beijing Compass Technology Development (1 is potentially serious) that 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.