Investors are selling off Liaoning Kelong Fine ChemicalInc (SZSE:300405), lack of profits no doubt contribute to shareholders three-year loss

It is a pleasure to report that the Liaoning Kelong Fine Chemical,Inc. (SZSE:300405) is up 42% in the last quarter. But that doesn't change the fact that the returns over the last three years have been less than pleasing. In fact, the share price is down 38% in the last three years, falling well short of the market return.

Given the past week has been tough on shareholders, let's investigate the fundamentals and see what we can learn.

See our latest analysis for Liaoning Kelong Fine ChemicalInc

Liaoning Kelong Fine ChemicalInc isn't currently profitable, so most analysts would look to revenue growth to get an idea of how fast the underlying business is growing. 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 Liaoning Kelong Fine ChemicalInc saw its revenue shrink by 27% per year. That means its revenue trend is very weak compared to other loss making companies. With revenue in decline, the share price decline of 11% per year is hardly undeserved. The key question now is whether the company has the capacity to fund itself to profitability, without more cash. The company will need to return to revenue growth as quickly as possible, if it wants to see some enthusiasm from investors.

You can see below how earnings and revenue have changed over time (discover the exact values by clicking on the image).

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. Dive deeper into the earnings by checking this interactive graph of Liaoning Kelong Fine ChemicalInc's earnings, revenue and cash flow.

A Different Perspective

While the broader market gained around 6.8% in the last year, Liaoning Kelong Fine ChemicalInc shareholders lost 14%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. On the bright side, long term shareholders have made money, with a gain of 0.6% per year over half a decade. If the fundamental data continues to indicate long term sustainable growth, the current sell-off could be an opportunity worth considering. It's always interesting to track share price performance over the longer term. But to understand Liaoning Kelong Fine ChemicalInc better, we need to consider many other factors. Take risks, for example - Liaoning Kelong Fine ChemicalInc has 1 warning sign we think you should be aware of.

Of course Liaoning Kelong Fine ChemicalInc 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.