The five-year decline in earnings for Henan Rebecca Hair Products SHSE:600439) isn't encouraging, but shareholders are still up 44% over that period

Henan Rebecca Hair Products Co., Ltd. (SHSE:600439) shareholders have seen the share price descend 13% over the month. On the bright side the returns have been quite good over the last half decade. It has returned a market beating 43% in that time.

While the stock has fallen 8.6% this week, it's worth focusing on the longer term and seeing if the stocks historical returns have been driven by the underlying fundamentals.

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While Henan Rebecca Hair Products 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. It would be hard to believe in a more profitable future without growing revenues.

In the last 5 years Henan Rebecca Hair Products saw its revenue shrink by 6.6% per year. Even though revenue hasn't increased, the stock actually gained 7%, per year, during the same period. To us that suggests that there probably isn't a lot of correlation between the past revenue performance and the share price, but a closer look at analyst forecasts and the bottom line may well explain a lot.

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

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. It might be well worthwhile taking a look at our free report on Henan Rebecca Hair Products' earnings, revenue and cash flow.

A Different Perspective

It's nice to see that Henan Rebecca Hair Products shareholders have received a total shareholder return of 42% over the last year. And that does include the dividend. That gain is better than the annual TSR over five years, which is 8%. Therefore it seems like sentiment around the company has been positive lately. Given the share price momentum remains strong, it might be worth taking a closer look at the stock, lest you miss an opportunity. 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. Case in point: We've spotted 5 warning signs for Henan Rebecca Hair Products you should be aware of, and 2 of them can't be ignored.

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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.