Rongsheng Petrochemical (SZSE:002493) shareholders have endured a 45% loss from investing in the stock three years ago

Rongsheng Petrochemical Co., Ltd. (SZSE:002493) shareholders should be happy to see the share price up 18% in the last quarter. But that doesn't change the fact that the returns over the last three years have been less than pleasing. Truth be told the share price declined 47% in three years and that return, Dear Reader, falls short of what you could have got from passive investing with an index fund.

So let's have a look and see if the longer term performance of the company has been in line with the underlying business' progress.

View our latest analysis for Rongsheng Petrochemical

To quote Buffett, 'Ships will sail around the world but the Flat Earth Society will flourish. There will continue to be wide discrepancies between price and value in the marketplace...' One flawed but reasonable way to assess how sentiment around a company has changed is to compare the earnings per share (EPS) with the share price.

During five years of share price growth, Rongsheng Petrochemical moved from a loss to profitability. We would usually expect to see the share price rise as a result. So given the share price is down it's worth checking some other metrics too.

With a rather small yield of just 1.0% we doubt that the stock's share price is based on its dividend. Revenue is actually up 20% over the three years, so the share price drop doesn't seem to hinge on revenue, either. It's probably worth investigating Rongsheng Petrochemical further; while we may be missing something on this analysis, there might also be an opportunity.

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

We know that Rongsheng Petrochemical has improved its bottom line lately, but what does the future have in store? This free report showing analyst forecasts should help you form a view on Rongsheng Petrochemical

A Different Perspective

Investors in Rongsheng Petrochemical had a tough year, with a total loss of 4.5% (including dividends), against a market gain of about 12%. Even the share prices of good stocks drop sometimes, but we want to see improvements in the fundamental metrics of a business, before getting too interested. Longer term investors wouldn't be so upset, since they would have made 4%, each year, over five years. If the fundamental data continues to indicate long term sustainable growth, the current sell-off could be an opportunity worth considering. While it is well worth considering the different impacts that market conditions can have on the share price, there are other factors that are even more important. To that end, you should learn about the 2 warning signs we've spotted with Rongsheng Petrochemical (including 1 which is concerning) .

But note: Rongsheng Petrochemical may not be the best stock to buy. So take a peek at this free list of interesting companies with past earnings growth (and further growth forecast).

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.