Investors in Daodaoquan Grain and OilLtd (SZSE:002852) from three years ago are still down 32%, even after 11% gain this past week

While it may not be enough for some shareholders, we think it is good to see the Daodaoquan Grain and Oil Co.,Ltd. (SZSE:002852) share price up 27% in a single quarter. But that doesn't change the fact that the returns over the last three years have been less than pleasing. In fact, the share price is down 34% in the last three years, falling well short of the market return.

While the stock has risen 11% in the past week but long term shareholders are still in the red, let's see what the fundamentals can tell us.

See our latest analysis for Daodaoquan Grain and OilLtd

While Daodaoquan Grain and OilLtd 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. 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.

Over three years, Daodaoquan Grain and OilLtd grew revenue at 6.4% per year. That's not a very high growth rate considering it doesn't make profits. The stock dropped 10% during that time. If revenue growth accelerates, we might see the share price bounce. But the real upside for shareholders will be if the company can start generating profits.

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. Before buying or selling a stock, we always recommend a close examination of historic growth trends, available here..

A Different Perspective

Investors in Daodaoquan Grain and OilLtd had a tough year, with a total loss of 21% (including dividends), against a market gain of about 8.1%. 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 5% 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. Take risks, for example - Daodaoquan Grain and OilLtd has 4 warning signs (and 1 which can't be ignored) we think you should know about.

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.