Shenzhen Original Advanced Compounds Co., Ltd. (SHSE:603991) shareholders might be concerned after seeing the share price drop 28% in the last quarter. But that doesn't change the fact that the returns over the last five years have been pleasing. Its return of 38% has certainly bested the market return!

While this past week has detracted from the company's five-year return, let's look at the recent trends of the underlying business and see if the gains have been in alignment.

Because Shenzhen Original Advanced Compounds 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. When a company doesn't make profits, we'd generally hope to see good revenue growth. As you can imagine, fast revenue growth, when maintained, often leads to fast profit growth.

In the last 5 years Shenzhen Original Advanced Compounds saw its revenue shrink by 34% per year. Even though revenue hasn't increased, the stock actually gained 7%, per year, during the same period. It's probably worth checking other factors such as the profitability, to try to understand the share price action. It may not be reflecting the revenue.

The company's revenue and earnings (over time) are depicted in the image below (click to see the exact numbers).

This free interactive report on Shenzhen Original Advanced Compounds' balance sheet strength is a great place to start, if you want to investigate the stock further.

A Different Perspective

While it's never nice to take a loss, Shenzhen Original Advanced Compounds shareholders can take comfort that their trailing twelve month loss of 10% wasn't as bad as the market loss of around 15%. Longer term investors wouldn't be so upset, since they would have made 7%, each year, over five years. In the best case scenario the last year is just a temporary blip on the journey to a brighter future. 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. To that end, you should be aware of the 2 warning signs we've spotted with Shenzhen Original Advanced Compounds .

Of course, you might find a fantastic investment by looking elsewhere. So take a peek at this free list of companies we expect will grow earnings.

Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on Chinese exchanges.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.
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.