North China Pharmaceutical Company.Ltd (SHSE:600812) shareholders are up 4.4% this past week, but still in the red over the last three years

While not a mind-blowing move, it is good to see that the North China Pharmaceutical Company.Ltd (SHSE:600812) share price has gained 22% in the last three months. But that doesn't change the fact that the returns over the last three years have been less than pleasing. After all, the share price is down 38% in the last three years, significantly under-performing the market.

On a more encouraging note the company has added CN¥395m to its market cap in just the last 7 days, so let's see if we can determine what's driven the three-year loss for shareholders.

View our latest analysis for North China Pharmaceutical Company.Ltd

We don't think that North China Pharmaceutical Company.Ltd'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.

In the last three years North China Pharmaceutical Company.Ltd saw its revenue shrink by 1.7% per year. That is not a good result. The stock has disappointed holders over the last three years, falling 11%, annualized. That makes sense given the lack of either profits or revenue growth. However, in this kind of situation you can sometimes find opportunity, where sentiment is negative but the company is actually making good progress.

The graphic below depicts how earnings and revenue have changed over time (unveil 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. But while CEO remuneration is always worth checking, the really important question is whether the company can grow earnings going forward. Before buying or selling a stock, we always recommend a close examination of historic growth trends, available here..

A Different Perspective

While the broader market gained around 8.8% in the last year, North China Pharmaceutical Company.Ltd shareholders lost 1.6% (even including dividends). 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. However, the loss over the last year isn't as bad as the 2% per annum loss investors have suffered over the last half decade. We would want clear information suggesting the company will grow, before taking the view that the share price will stabilize. 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. To that end, you should learn about the 2 warning signs we've spotted with North China Pharmaceutical Company.Ltd (including 1 which can't be ignored) .

Of course North China Pharmaceutical Company.Ltd 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.