Shanghai LongYun Cultural Creation & Technology Group Co., Ltd. (SHSE:603729) shareholders might be concerned after seeing the share price drop 22% in the last quarter. In contrast, the return over three years has been impressive. In three years the stock price has launched 102% higher: a great result. It's not uncommon to see a share price retrace a bit, after a big gain. Only time will tell if there is still too much optimism currently reflected in the share price.

Since the stock has added CN¥388m to its market cap in the past week alone, let's see if underlying performance has been driving long-term returns.

Shanghai LongYun Cultural Creation & Technology Group isn't currently profitable, so most analysts would look to revenue growth to get an idea of how fast the underlying business is growing. Generally speaking, companies without profits are expected to grow revenue every year, and at a good clip. 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 3 years Shanghai LongYun Cultural Creation & Technology Group saw its revenue shrink by 25% per year. So we wouldn't have expected the share price to gain 26% per year, but it has. It's a good reminder that expectations about the future, not the past history, always impact share prices.

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

It's probably worth noting that the CEO is paid less than the median at similar sized 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. Before buying or selling a stock, we always recommend a close examination of historic growth trends, available here..

A Different Perspective

We're pleased to report that Shanghai LongYun Cultural Creation & Technology Group shareholders have received a total shareholder return of 77% over one year. Since the one-year TSR is better than the five-year TSR (the latter coming in at 2% per year), it would seem that the stock's performance has improved in recent times. In the best case scenario, this may hint at some real business momentum, implying that now could be a great time to delve deeper. 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. Take risks, for example - Shanghai LongYun Cultural Creation & Technology Group has 2 warning signs we think you should be aware of.

But note: Shanghai LongYun Cultural Creation & Technology Group 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.