North Huajin Chemical IndustriesLtd's (SZSE:000059 three-year decrease in earnings delivers investors with a 30% loss

Simply Wall St · 10/16 01:52

North Huajin Chemical Industries Co.,Ltd (SZSE:000059) shareholders should be happy to see the share price up 22% in the last month. But that doesn't change the fact that the returns over the last three years have been less than pleasing. In fact, the share price is down 34% in the last three years, falling well short of the market return.

With the stock having lost 9.1% in the past week, it's worth taking a look at business performance and seeing if there's any red flags.

See our latest analysis for North Huajin Chemical IndustriesLtd

Given that North Huajin Chemical IndustriesLtd only made minimal earnings in the last twelve months, we'll focus on revenue to gauge its business development. As a general rule, we think this kind of company is more comparable to loss-making stocks, since the actual profit is so low. It would be hard to believe in a more profitable future without growing revenues.

In the last three years, North Huajin Chemical IndustriesLtd saw its revenue grow by 8.0% per year, compound. That's a pretty good rate of top-line growth. Shareholders have seen the share price fall at 10% per year, for three years. This implies the market had higher expectations of North Huajin Chemical IndustriesLtd. With revenue growing at a solid clip, now might be the time to focus on the possibility that it will have a brighter future.

You can see how earnings and revenue have changed over time in the image below (click on the chart to see the exact values).

earnings-and-revenue-growth
SZSE:000059 Earnings and Revenue Growth October 16th 2024

We know that North Huajin Chemical IndustriesLtd has improved its bottom line lately, but what does the future have in store? You can see what analysts are predicting for North Huajin Chemical IndustriesLtd in this interactive graph of future profit estimates.

What About Dividends?

It is important to consider the total shareholder return, as well as the share price return, for any given stock. Whereas the share price return only reflects the change in the share price, the TSR includes the value of dividends (assuming they were reinvested) and the benefit of any discounted capital raising or spin-off. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. We note that for North Huajin Chemical IndustriesLtd the TSR over the last 3 years was -30%, which is better than the share price return mentioned above. This is largely a result of its dividend payments!

A Different Perspective

We regret to report that North Huajin Chemical IndustriesLtd shareholders are down 25% for the year (even including dividends). Unfortunately, that's worse than the broader market decline of 0.6%. However, it could simply be that the share price has been impacted by broader market jitters. It might be worth keeping an eye on the fundamentals, in case there's a good opportunity. Regrettably, last year's performance caps off a bad run, with the shareholders facing a total loss of 3% per year over five years. We realise that Baron Rothschild has said investors should "buy when there is blood on the streets", but we caution that investors should first be sure they are buying a high quality business. It's always interesting to track share price performance over the longer term. But to understand North Huajin Chemical IndustriesLtd better, we need to consider many other factors. For instance, we've identified 1 warning sign for North Huajin Chemical IndustriesLtd that you should be aware of.

If you would prefer to check out another company -- one with potentially superior financials -- then do not miss this free list of companies that have proven they can 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.