Hunan Friendship&Apollo CommercialLtd (SZSE:002277) investors are up 14% in the past week, but earnings have declined over the last three years

The worst result, after buying shares in a company (assuming no leverage), would be if you lose all the money you put in. But when you pick a company that is really flourishing, you can make more than 100%. For instance the Hunan Friendship&Apollo Commercial Co.,Ltd. (SZSE:002277) share price is 112% higher than it was three years ago. How nice for those who held the stock! It's up an even more impressive 169% over the last quarter.

Since the stock has added CN¥1.2b to its market cap in the past week alone, let's see if underlying performance has been driving long-term returns.

View our latest analysis for Hunan Friendship&Apollo CommercialLtd

We don't think that Hunan Friendship&Apollo CommercialLtd's modest trailing twelve month profit has the market's full attention at the moment. We think revenue is probably a better guide. 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.

In the last 3 years Hunan Friendship&Apollo CommercialLtd saw its revenue shrink by 31% per year. So the share price gain of 28% per year is quite surprising. It's fair to say shareholders are definitely counting on a bright future.

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

It's nice to see that Hunan Friendship&Apollo CommercialLtd shareholders have received a total shareholder return of 71% over the last year. That's including the dividend. Since the one-year TSR is better than the five-year TSR (the latter coming in at 16% per year), it would seem that the stock's performance has improved in recent times. Someone with an optimistic perspective could view the recent improvement in TSR as indicating that the business itself is getting better with time. 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 Hunan Friendship&Apollo CommercialLtd is showing 4 warning signs in our investment analysis , and 2 of those make us uncomfortable...

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.