Even after rising 11% this past week, Henan Ancai Hi-TechLtd (SHSE:600207) shareholders are still down 41% over the past three years

Henan Ancai Hi-Tech Co.,Ltd (SHSE:600207) shareholders should be happy to see the share price up 18% in the last month. But that doesn't change the fact that the returns over the last three years have been less than pleasing. After all, the share price is down 41% in the last three years, significantly under-performing the market.

On a more encouraging note the company has added CN¥447m to its market cap in just the last 7 days, so let's see if we can determine what's driven the three-year loss for shareholders.

See our latest analysis for Henan Ancai Hi-TechLtd

Henan Ancai Hi-TechLtd 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. Shareholders of unprofitable companies usually desire strong revenue growth. That's because it's hard to be confident a company will be sustainable if revenue growth is negligible, and it never makes a profit.

In the last three years, Henan Ancai Hi-TechLtd saw its revenue grow by 22% per year, compound. That is faster than most pre-profit companies. The share price drop of 12% per year over three years would be considered disappointing by many, so you might argue the company is getting little credit for its impressive revenue growth. It seems likely that actual growth fell short of shareholders' expectations. Before considering a purchase, investors should consider how quickly expenses are growing, relative to revenue.

The image below shows how earnings and revenue have tracked over time (if you click on the image you can see greater detail).

This free interactive report on Henan Ancai Hi-TechLtd's balance sheet strength is a great place to start, if you want to investigate the stock further.

A Different Perspective

While the broader market lost about 6.0% in the twelve months, Henan Ancai Hi-TechLtd shareholders did even worse, losing 14%. Having said that, it's inevitable that some stocks will be oversold in a falling market. The key is to keep your eyes on the fundamental developments. Regrettably, last year's performance caps off a bad run, with the shareholders facing a total loss of 2% per year over five years. Generally speaking long term share price weakness can be a bad sign, though contrarian investors might want to research the stock in hope of a turnaround. 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. Take risks, for example - Henan Ancai Hi-TechLtd has 1 warning sign we think you should be aware of.

But note: Henan Ancai Hi-TechLtd may not be the best stock to buy. So take a peek at this free list of interesting companies with past earnings growth (and further growth forecast).

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.