Investors push Nanjing Chemical Fiber (SHSE:600889) 8.7% lower this week, company's increasing losses might be to blame

Some Nanjing Chemical Fiber Co., Ltd. (SHSE:600889) shareholders are probably rather concerned to see the share price fall 32% over the last three months. But that doesn't detract from the splendid returns of the last year. During that period, the share price soared a full 264%. So it may be that the share price is simply cooling off after a strong rise. The real question is whether the business is trending in the right direction.

In light of the stock dropping 8.7% in the past week, we want to investigate the longer term story, and see if fundamentals have been the driver of the company's positive one-year return.

Given that Nanjing Chemical Fiber didn't make a profit in the last twelve months, we'll focus on revenue growth to form a quick view of its business development. When a company doesn't make profits, we'd generally hope to see good revenue growth. That's because it's hard to be confident a company will be sustainable if revenue growth is negligible, and it never makes a profit.

Over the last twelve months, Nanjing Chemical Fiber's revenue grew by 16%. That's a fairly respectable growth rate. The revenue growth is decent but the share price had an even better year, gaining 264%. If the profitability is on the horizon then now could be a very exciting time to be a shareholder. But investors need to be wary of how the 'fear of missing out' could influence them to buy without doing thorough research.

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

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

We're pleased to report that Nanjing Chemical Fiber shareholders have received a total shareholder return of 264% over one year. Since the one-year TSR is better than the five-year TSR (the latter coming in at 26% per year), it would seem that the stock's performance has improved in recent times. Given the share price momentum remains strong, it might be worth taking a closer look at the stock, lest you miss an opportunity. It's always interesting to track share price performance over the longer term. But to understand Nanjing Chemical Fiber better, we need to consider many other factors. Consider risks, for instance. Every company has them, and we've spotted 2 warning signs for Nanjing Chemical Fiber you should know about.

Of course, you might find a fantastic investment by looking elsewhere. So take a peek at this free list of companies we expect will grow earnings.

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.