Zhongfu Information (SZSE:300659) shareholders are up 8.8% this past week, but still in the red over the last five years

Zhongfu Information Inc. (SZSE:300659) shareholders should be happy to see the share price up 19% in the last month. But that is little comfort to those holding over the last half decade, sitting on a big loss. In fact, the share price has declined rather badly, down some 64% in that time. So we're hesitant to put much weight behind the short term increase. However, in the best case scenario (far from fait accompli), this improved performance might be sustained.

On a more encouraging note the company has added CN¥378m to its market cap in just the last 7 days, so let's see if we can determine what's driven the five-year loss for shareholders.

View our latest analysis for Zhongfu Information

Because Zhongfu Information made a loss in the last twelve months, we think the market is probably more focussed on revenue and revenue growth, at least for now. Generally speaking, companies without profits are expected to grow revenue every year, and at a good clip. 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.

Over five years, Zhongfu Information grew its revenue at 4.0% per year. That's far from impressive given all the money it is losing. This lacklustre growth has no doubt fueled the loss of 10% per year, in that time. We'd want to see proof that future revenue growth is likely to be significantly stronger before getting too interested in Zhongfu Information. When a stock falls hard like this, some investors like to add the company to a watchlist (in case the business recovers, longer term).

You can see below how earnings and revenue have changed over time (discover 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. It's always worth keeping an eye on CEO pay, but a more important question is whether the company will grow earnings throughout the years. This free interactive report on Zhongfu Information's earnings, revenue and cash flow is a great place to start, if you want to investigate the stock further.

A Different Perspective

It's good to see that Zhongfu Information has rewarded shareholders with a total shareholder return of 35% in the last twelve months. There's no doubt those recent returns are much better than the TSR loss of 10% per year over five years. The long term loss makes us cautious, but the short term TSR gain certainly hints at a brighter future. 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 3 warning signs for Zhongfu Information (1 is a bit unpleasant) that you should be aware of.

For those who like to find winning investments this free list of undervalued companies with recent insider purchasing, could be just the ticket.

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.