Investors who have held XiangcaiLtd (SHSE:600095) over the last three years have watched its earnings decline along with their investment

In order to justify the effort of selecting individual stocks, it's worth striving to beat the returns from a market index fund. But in any portfolio, there are likely to be some stocks that fall short of that benchmark. We regret to report that long term Xiangcai Co.,Ltd (SHSE:600095) shareholders have had that experience, with the share price dropping 28% in three years, versus a market decline of about 8.2%. The falls have accelerated recently, with the share price down 15% in the last three months.

While the stock has risen 5.8% in the past week but long term shareholders are still in the red, let's see what the fundamentals can tell us.

See our latest analysis for XiangcaiLtd

Given that XiangcaiLtd only made minimal earnings in the last twelve months, we'll focus on revenue to gauge its business development. As a general rule, we think this kind of company is more comparable to loss-making stocks, since the actual profit is so low. It would be hard to believe in a more profitable future without growing revenues.

Over the last three years, XiangcaiLtd's revenue dropped 37% per year. That's definitely a weaker result than most pre-profit companies report. On the face of it we'd posit the share price fall of 9% compound, over three years is well justified by the fundamental deterioration. 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.

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

We know that XiangcaiLtd has improved its bottom line lately, but what does the future have in store? So it makes a lot of sense to check out what analysts think XiangcaiLtd will earn in the future (free profit forecasts).

What About Dividends?

It is important to consider the total shareholder return, as well as the share price return, for any given stock. The TSR is a return calculation that accounts for the value of cash dividends (assuming that any dividend received was reinvested) and the calculated value of any discounted capital raisings and spin-offs. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. In the case of XiangcaiLtd, it has a TSR of -26% for the last 3 years. That exceeds its share price return that we previously mentioned. This is largely a result of its dividend payments!

A Different Perspective

Investors in XiangcaiLtd had a tough year, with a total loss of 2.0% (including dividends), against a market gain of about 22%. 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. Unfortunately, longer term shareholders are suffering worse, given the loss of 3% doled out over the last five years. We'd need to see some sustained improvements in the key metrics before we could muster much enthusiasm. 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. Even so, be aware that XiangcaiLtd is showing 1 warning sign in our investment analysis , you should know about...

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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.