Many investors define successful investing as beating the market average over the long term. But the risk of stock picking is that you will likely buy under-performing companies. Unfortunately, that's been the case for longer term CECEP Environmental Protection Co., Ltd. (SZSE:300140) shareholders, since the share price is down 22% in the last three years, falling well short of the market decline of around 12%. Shareholders have had an even rougher run lately, with the share price down 13% in the last 90 days. However, one could argue that the price has been influenced by the general market, which is down 11% in the same timeframe.
Now let's have a look at the company's fundamentals, and see if the long term shareholder return has matched the performance of the underlying business.
See our latest analysis for CECEP Environmental Protection
While CECEP Environmental Protection made a small profit, in the last year, we think that the market is probably more focussed on the top line growth at the moment. As a general rule, we think this kind of company is more comparable to loss-making stocks, since the actual profit is so low. For shareholders to have confidence a company will grow profits significantly, it must grow revenue.
In the last three years CECEP Environmental Protection saw its revenue shrink by 1.6% per year. That is not a good result. The stock has disappointed holders over the last three years, falling 7%, annualized. That makes sense given the lack of either profits or revenue growth. However, in this kind of situation you can sometimes find opportunity, where sentiment is negative but the company is actually making good progress.
The company's revenue and earnings (over time) are depicted in the image below (click to see the exact numbers).
Take a more thorough look at CECEP Environmental Protection's financial health with this free report on its balance sheet.
A Different Perspective
We're pleased to report that CECEP Environmental Protection shareholders have received a total shareholder return of 9.3% over one year. That gain is better than the annual TSR over five years, which is 0.1%. Therefore it seems like sentiment around the company has been positive lately. Someone with an optimistic perspective could view the recent improvement in TSR as indicating that the business itself is getting better with time. 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. Case in point: We've spotted 3 warning signs for CECEP Environmental Protection you should be aware of, and 2 of them are a bit unpleasant.
For those who like to find winning investments this free list of growing 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.