Shareholders in SinoDaan (SZSE:300635) have lost 60%, as stock drops 13% this past week

Statistically speaking, long term investing is a profitable endeavour. But along the way some stocks are going to perform badly. For example, after five long years the SinoDaan Co., Ltd. (SZSE:300635) share price is a whole 60% lower. That's not a lot of fun for true believers. And we doubt long term believers are the only worried holders, since the stock price has declined 43% over the last twelve months. The falls have accelerated recently, with the share price down 16% in the last three months.

With the stock having lost 13% in the past week, it's worth taking a look at business performance and seeing if there's any red flags.

Check out our latest analysis for SinoDaan

Given that SinoDaan 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. 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 five years, SinoDaan grew its revenue at 5.5% per year. That's not a very high growth rate considering it doesn't make profits. It's likely this weak growth has contributed to an annualised return of 10% for the last five years. We'd want to see proof that future revenue growth is likely to be significantly stronger before getting too interested in SinoDaan. When a stock falls hard like this, some investors like to add the company to a watchlist (in case the business recovers, longer term).

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

This free interactive report on SinoDaan's balance sheet strength is a great place to start, if you want to investigate the stock further.

A Different Perspective

We regret to report that SinoDaan shareholders are down 43% for the year (even including dividends). Unfortunately, that's worse than the broader market decline of 9.6%. 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. Unfortunately, last year's performance may indicate unresolved challenges, given that it was worse than the annualised loss of 10% over the last half decade. Generally speaking long term share price weakness can be a bad sign, though contrarian investors might want to research the stock in hope of a turnaround. While it is well worth considering the different impacts that market conditions can have on the share price, there are other factors that are even more important. Consider for instance, the ever-present spectre of investment risk. We've identified 2 warning signs with SinoDaan (at least 1 which doesn't sit too well with us) , and understanding them should be part of your investment process.

Of course, you might find a fantastic investment by looking elsewhere. So take a peek at this free list of companies we expect will 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.

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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.