LingNan Eco&Culture-TourismLtd (SZSE:002717 shareholders incur further losses as stock declines 12% this week, taking five-year losses to 81%

Long term investing works well, but it doesn't always work for each individual stock. It hits us in the gut when we see fellow investors suffer a loss. Anyone who held LingNan Eco&Culture-Tourism Co.,Ltd. (SZSE:002717) for five years would be nursing their metaphorical wounds since the share price dropped 81% in that time. And some of the more recent buyers are probably worried, too, with the stock falling 72% in the last year. Furthermore, it's down 50% in about a quarter. That's not much fun for holders. We really hope anyone holding through that price crash has a diversified portfolio. Even when you lose money, you don't have to lose the lesson.

Since LingNan Eco&Culture-TourismLtd has shed CN¥219m from its value in the past 7 days, let's see if the longer term decline has been driven by the business' economics.

See our latest analysis for LingNan Eco&Culture-TourismLtd

LingNan Eco&Culture-TourismLtd 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 hope to see good revenue growth. That's because fast revenue growth can be easily extrapolated to forecast profits, often of considerable size.

Over half a decade LingNan Eco&Culture-TourismLtd reduced its trailing twelve month revenue by 29% for each year. That puts it in an unattractive cohort, to put it mildly. So it's not that strange that the share price dropped 13% per year in that period. We don't think this is a particularly promising picture. Ironically, that behavior could create an opportunity for the contrarian investor - but only if there are good reasons to predict a brighter future.

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

Take a more thorough look at LingNan Eco&Culture-TourismLtd's financial health with this free report on its balance sheet.

A Different Perspective

While the broader market lost about 15% in the twelve months, LingNan Eco&Culture-TourismLtd shareholders did even worse, losing 72%. Having said that, it's inevitable that some stocks will be oversold in a falling market. The key is to keep your eyes on the fundamental developments. Regrettably, last year's performance caps off a bad run, with the shareholders facing a total loss of 13% 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 LingNan Eco&Culture-TourismLtd better, we need to consider many other factors. Even so, be aware that LingNan Eco&Culture-TourismLtd is showing 3 warning signs in our investment analysis , you should know about...

But note: LingNan Eco&Culture-TourismLtd 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.

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