Strong week for Hunan Baili Engineering Sci&TechLtd (SHSE:603959) shareholders doesn't alleviate pain of three-year loss

It is a pleasure to report that the Hunan Baili Engineering Sci&Tech Co.,Ltd (SHSE:603959) is up 84% in the last quarter. But the last three years have seen a terrible decline. In that time the share price has melted like a snowball in the desert, down 80%. Arguably, the recent bounce is to be expected after such a bad drop. The thing to think about is whether the business has really turned around.

The recent uptick of 11% could be a positive sign of things to come, so let's take a look at historical fundamentals.

Check out our latest analysis for Hunan Baili Engineering Sci&TechLtd

Hunan Baili Engineering Sci&TechLtd 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.

Over three years, Hunan Baili Engineering Sci&TechLtd grew revenue at 12% per year. That's a pretty good rate of top-line growth. So it seems unlikely the 22% share price drop (each year) is entirely about the revenue. It could be that the losses were much larger than expected. If you buy into companies that lose money then you always risk losing money yourself. Just don't lose the lesson.

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 Hunan Baili Engineering Sci&TechLtd's financial health with this free report on its balance sheet.

A Different Perspective

Hunan Baili Engineering Sci&TechLtd shareholders are down 61% for the year, but the market itself is up 14%. Even the share prices of good stocks drop sometimes, but we want to see improvements in the fundamental metrics of a business, before getting too interested. Unfortunately, last year's performance may indicate unresolved challenges, given that it was worse than the annualised loss of 11% over the last half decade. 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. Shareholders might want to examine this detailed historical graph of past earnings, revenue and cash flow.

If you are like me, then you will not want to miss this free list of undervalued small caps 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 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.