Shanghai Huaming Intelligent Terminal Equipment (SZSE:300462 shareholders incur further losses as stock declines 12% this week, taking five-year losses to 58%

It is doubtless a positive to see that the Shanghai Huaming Intelligent Terminal Equipment Co., Ltd. (SZSE:300462) share price has gained some 39% in the last three months. But that is little comfort to those holding over the last half decade, sitting on a big loss. Indeed, the share price is down 59% in the period. Some might say the recent bounce is to be expected after such a bad drop. But it could be that the fall was overdone.

With the stock having lost 12% 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 Shanghai Huaming Intelligent Terminal Equipment

Given that Shanghai Huaming Intelligent Terminal Equipment didn't make a profit in the last twelve months, we'll focus on revenue growth to form a quick view of its business development. Generally speaking, companies without profits are expected to grow revenue every year, and at a good clip. Some companies are willing to postpone profitability to grow revenue faster, but in that case one would hope for good top-line growth to make up for the lack of earnings.

In the last five years Shanghai Huaming Intelligent Terminal Equipment saw its revenue shrink by 22% per year. That's definitely a weaker result than most pre-profit companies report. Arguably, the market has responded appropriately to this business performance by sending the share price down 10% (annualized) in the same time period. It's fair to say most investors don't like to invest in loss making companies with falling revenue. You'd want to research this company pretty thoroughly before buying, it looks a bit too risky for us.

You can see below how earnings and revenue have changed over time (discover the exact values by clicking on the image).

We're pleased to report that the CEO is remunerated more modestly than most CEOs at similarly capitalized companies. But while CEO remuneration is always worth checking, the really important question is whether the company can grow earnings going forward. It might be well worthwhile taking a look at our free report on Shanghai Huaming Intelligent Terminal Equipment's earnings, revenue and cash flow.

A Different Perspective

Shanghai Huaming Intelligent Terminal Equipment shareholders are down 12% for the year, but the market itself is up 12%. 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, longer term shareholders are suffering worse, given the loss of 10% doled out over the last five years. We would want clear information suggesting the company will grow, before taking the view that the share price will stabilize. It's always interesting to track share price performance over the longer term. But to understand Shanghai Huaming Intelligent Terminal Equipment better, we need to consider many other factors. For instance, we've identified 1 warning sign for Shanghai Huaming Intelligent Terminal Equipment that you should be aware of.

Of course Shanghai Huaming Intelligent Terminal Equipment may not be the best stock to buy. So you may wish to see this free collection of growth stocks.

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.