Market is not liking Great-Sun Foods' (SHSE:603336) earnings decline as stock retreats 10% this week

It is a pleasure to report that the Great-Sun Foods Co., Ltd. (SHSE:603336) is up 47% 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 21% in the last three years, falling well short of the market return.

With the stock having lost 10% in the past week, it's worth taking a look at business performance and seeing if there's any red flags.

See our latest analysis for Great-Sun Foods

While Great-Sun Foods made a small profit, in the last year, we think that the market is probably more focussed on the top line growth at the moment. Generally speaking, we'd consider a stock like this alongside loss-making companies, simply because the quantum of the profit is so low. For shareholders to have confidence a company will grow profits significantly, it must grow revenue.

In the last three years, Great-Sun Foods saw its revenue grow by 2.9% per year, compound. Given it's losing money in pursuit of growth, we are not really impressed with that. The stock dropped 7% during that time. Shareholders will probably be hoping growth picks up soon. But ultimately the key will be whether the company can become profitability.

The graphic below depicts how earnings and revenue have changed over time (unveil 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. 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. Before buying or selling a stock, we always recommend a close examination of historic growth trends, available here..

A Different Perspective

Investors in Great-Sun Foods had a tough year, with a total loss of 9.0%, against a market gain of about 6.0%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. Regrettably, last year's performance caps off a bad run, with the shareholders facing a total loss of 3% per year over five years. 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. 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. Even so, be aware that Great-Sun Foods is showing 4 warning signs in our investment analysis , and 2 of those shouldn't be ignored...

If you are like me, then you will not want to miss this free list of undervalued small caps that insiders are 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.