Further weakness as Luoniushan (SZSE:000735) drops 7.4% this week, taking five-year losses to 32%

Luoniushan Co., Ltd. (SZSE:000735) shareholders will doubtless be very grateful to see the share price up 40% in the last quarter. But over the last half decade, the stock has not performed well. After all, the share price is down 33% in that time, significantly under-performing the market.

With the stock having lost 7.4% in the past week, it's worth taking a look at business performance and seeing if there's any red flags.

Check out our latest analysis for Luoniushan

We don't think that Luoniushan's modest trailing twelve month profit has the market's full attention at the moment. We think revenue is probably a better guide. 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.

Over five years, Luoniushan grew its revenue at 23% per year. That's better than most loss-making companies. The share price drop of 6% per year over five years would be considered let down. So you might argue the Luoniushan should get more credit for its rather impressive revenue growth over the period. So now is probably an apt time to look closer at the stock, if you think it has potential.

You can see how earnings and revenue have changed over time in the image below (click on the chart to see the exact values).

This free interactive report on Luoniushan's balance sheet strength is a great place to start, if you want to investigate the stock further.

A Different Perspective

It's good to see that Luoniushan has rewarded shareholders with a total shareholder return of 22% in the last twelve months. And that does include the dividend. Notably the five-year annualised TSR loss of 6% per year compares very unfavourably with the recent share price performance. This makes us a little wary, but the business might have turned around its fortunes. 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 - Luoniushan has 1 warning sign we think you should be aware of.

Of course Luoniushan may not be the best stock to buy. So you may wish to see this free collection of growth stocks.

Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on Chinese exchanges.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.