Zhengyuan Zhihui GroupLtd (SZSE:300645) investors are up 10% in the past week, but earnings have declined over the last year

If you want to compound wealth in the stock market, you can do so by buying an index fund. But one can do better than that by picking better than average stocks (as part of a diversified portfolio). To wit, the Zhengyuan Zhihui Group Co.,Ltd. (SZSE:300645) share price is 49% higher than it was a year ago, much better than the market return of around 19% (not including dividends) in the same period. So that should have shareholders smiling. On the other hand, longer term shareholders have had a tougher run, with the stock falling 36% in three years.

Since the stock has added CN¥210m 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 Zhengyuan Zhihui GroupLtd

Given that Zhengyuan Zhihui GroupLtd only made minimal earnings in the last twelve months, we'll focus on revenue to gauge its business development. 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 year Zhengyuan Zhihui GroupLtd saw its revenue shrink by 3.5%. The stock is up 49% in that time, a fine performance given the revenue drop. To us that means that there isn't a lot of correlation between the past revenue performance and the share price, but a closer look at analyst forecasts and the bottom line may well explain a lot.

The graphic below depicts how earnings and revenue have changed over time (unveil the exact values by clicking on the image).

If you are thinking of buying or selling Zhengyuan Zhihui GroupLtd stock, you should check out this FREE detailed report on its balance sheet.

A Different Perspective

It's good to see that Zhengyuan Zhihui GroupLtd has rewarded shareholders with a total shareholder return of 49% in the last twelve months. That's including the dividend. That's better than the annualised return of 2% over half a decade, implying that the company is doing better recently. Given the share price momentum remains strong, it might be worth taking a closer look at the stock, lest you miss an opportunity. It's always interesting to track share price performance over the longer term. But to understand Zhengyuan Zhihui GroupLtd better, we need to consider many other factors. To that end, you should learn about the 3 warning signs we've spotted with Zhengyuan Zhihui GroupLtd (including 1 which can't be ignored) .

If you are like me, then you will not want to miss this free list of undervalued small caps that insiders are buying.

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.