Shareholders in Sichuan Xinjinlu Group (SZSE:000510) have lost 32%, as stock drops 11% this past week

While it may not be enough for some shareholders, we think it is good to see the Sichuan Xinjinlu Group Co., Ltd. (SZSE:000510) share price up 26% in a single quarter. But that cannot eclipse the less-than-impressive returns over the last three years. Truth be told the share price declined 32% in three years and that return, Dear Reader, falls short of what you could have got from passive investing with an index fund.

Since Sichuan Xinjinlu Group has shed CN¥292m from its value in the past 7 days, let's see if the longer term decline has been driven by the business' economics.

See our latest analysis for Sichuan Xinjinlu Group

Sichuan Xinjinlu Group wasn't profitable in the last twelve months, it is unlikely we'll see a strong correlation between its share price and its earnings per share (EPS). Arguably revenue is our next best option. Generally speaking, companies without profits are expected to grow revenue every year, and at a good clip. Some companies are willing to postpone profitability to grow revenue faster, but in that case one would hope for good top-line growth to make up for the lack of earnings.

In the last three years Sichuan Xinjinlu Group saw its revenue shrink by 12% per year. That's not what investors generally want to see. The annual decline of 10% per year in that period has clearly disappointed holders. And with no profits, and weak revenue, are you surprised? However, in this kind of situation you can sometimes find opportunity, where sentiment is negative but the company is actually making good progress.

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

If you are thinking of buying or selling Sichuan Xinjinlu Group stock, you should check out this FREE detailed report on its balance sheet.

A Different Perspective

While the broader market gained around 14% in the last year, Sichuan Xinjinlu Group shareholders lost 31%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. Unfortunately, last year's performance may indicate unresolved challenges, given that it was worse than the annualised loss of 1.5% over the last half decade. 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. Consider risks, for instance. Every company has them, and we've spotted 1 warning sign for Sichuan Xinjinlu Group you should know about.

Of course Sichuan Xinjinlu Group 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.

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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.