Investors ignore increasing losses at Shaanxi Kanghui Pharmaceutical (SHSE:603139) as stock jumps 21% this past week

If you want to compound wealth in the stock market, you can do so by buying an index fund. But investors can boost returns by picking market-beating companies to own shares in. For example, the Shaanxi Kanghui Pharmaceutical Co., Ltd. (SHSE:603139) share price is up 26% in the last 1 year, clearly besting the market return of around 12% (not including dividends). That's a solid performance by our standards! Unfortunately the longer term returns are not so good, with the stock falling 3.3% in the last three years.

Since it's been a strong week for Shaanxi Kanghui Pharmaceutical shareholders, let's have a look at trend of the longer term fundamentals.

Check out our latest analysis for Shaanxi Kanghui Pharmaceutical

Shaanxi Kanghui Pharmaceutical 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. When a company doesn't make profits, we'd generally hope to see good revenue growth. 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 year Shaanxi Kanghui Pharmaceutical saw its revenue grow by 2.8%. That's not great considering the company is losing money. The modest growth is probably largely reflected in the share price, which is up 26%. That's not a standout result, but it is solid - much like the level of revenue growth. Given the market doesn't seem too excited about the stock, a closer look at the financial data could pay off, if you can find indications of a stronger growth trend in the future.

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

You can see how its balance sheet has strengthened (or weakened) over time in this free interactive graphic.

A Different Perspective

It's nice to see that Shaanxi Kanghui Pharmaceutical shareholders have received a total shareholder return of 26% over the last year. That gain is better than the annual TSR over five years, which is 1.6%. Therefore it seems like sentiment around the company has been positive lately. In the best case scenario, this may hint at some real business momentum, implying that now could be a great time to delve deeper. 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. For instance, we've identified 2 warning signs for Shaanxi Kanghui Pharmaceutical that you should be aware of.

Of course, you might find a fantastic investment by looking elsewhere. So take a peek at this free list of companies we expect will grow earnings.

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.