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China Green Agriculture, Inc. (NYSE:CGA) shareholders might understandably be very concerned that the share price has dropped 46% in the last quarter. Despite this, the stock is a strong performer over the last year, no doubt about that. Indeed, the share price is up an impressive 127% in that time. So it may be that the share price is simply cooling off after a strong rise. Investors should be wondering whether the business itself has the fundamental value required to continue to drive gains.
While the stock has fallen 16% this week, it's worth focusing on the longer term and seeing if the stocks historical returns have been driven by the underlying fundamentals.
China Green Agriculture isn't currently profitable, so most analysts would look to revenue growth to get an idea of how fast the underlying business is growing. When a company doesn't make profits, we'd generally expect to see good revenue growth. That's because fast revenue growth can be easily extrapolated to forecast profits, often of considerable size.
In the last year China Green Agriculture saw its revenue shrink by 7.9%. We're a little surprised to see the share price pop 127% in the last year. It just goes to show the market doesn't always pay attention to the reported numbers. It's quite likely the revenue fall was already priced in, anyway.
The image below shows how earnings and revenue have tracked over time (if you click on the image you can see greater detail).
If you are thinking of buying or selling China Green Agriculture stock, you should check out this FREE detailed report on its balance sheet.
A Different Perspective
It's good to see that China Green Agriculture has rewarded shareholders with a total shareholder return of 127% in the last twelve months. That certainly beats the loss of about 8% per year over the last half decade. This makes us a little wary, but the business might have turned around its fortunes. 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. Even so, be aware that China Green Agriculture is showing 5 warning signs in our investment analysis , and 2 of those make us uncomfortable...
If you are like me, then you will not want to miss this free list of growing companies that insiders are buying.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on US exchanges.
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.
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