Pulling back 9.5% this week, Hebei Jianxin Chemical's SZSE:300107) one-year decline in earnings may be coming into investors focus

Passive investing in index funds can generate returns that roughly match the overall market. But you can significantly boost your returns by picking above-average stocks. To wit, the Hebei Jianxin Chemical Co., Ltd. (SZSE:300107) share price is 94% higher than it was a year ago, much better than the market return of around 11% (not including dividends) in the same period. If it can keep that out-performance up over the long term, investors will do very well! And shareholders have also done well over the long term, with an increase of 66% in the last three years.

Although Hebei Jianxin Chemical has shed CN¥601m from its market cap this week, let's take a look at its longer term fundamental trends and see if they've driven returns.

View our latest analysis for Hebei Jianxin Chemical

We don't think that Hebei Jianxin Chemical's modest trailing twelve month profit has the market's full attention at the moment. We think revenue is probably a better guide. Generally speaking, we'd consider a stock like this alongside loss-making companies, simply because the quantum of the profit is so low. For shareholders to have confidence a company will grow profits significantly, it must grow revenue.

Hebei Jianxin Chemical actually shrunk its revenue over the last year, with a reduction of 2.8%. The stock is up 94% in that time, a fine performance given the revenue drop. We can correlate the share price rise with revenue or profit growth, but it seems the market had previously expected weaker results, and sentiment around the stock is improving.

You can see how earnings and revenue have changed over time in the image below (click on the chart to see the exact values).

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 Hebei Jianxin Chemical's earnings, revenue and cash flow.

A Different Perspective

We're pleased to report that Hebei Jianxin Chemical shareholders have received a total shareholder return of 94% over one year. And that does include the dividend. Since the one-year TSR is better than the five-year TSR (the latter coming in at 11% per year), it would seem that the stock's performance has improved in recent times. In the best case scenario, this may hint at some real business momentum, implying that now could be a great time to delve deeper. It's always interesting to track share price performance over the longer term. But to understand Hebei Jianxin Chemical better, we need to consider many other factors. Consider risks, for instance. Every company has them, and we've spotted 2 warning signs for Hebei Jianxin Chemical you should know about.

We will like Hebei Jianxin Chemical better if we see some big insider buys. While we wait, check out this free list of undervalued stocks (mostly small caps) with considerable, recent, insider buying.

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.