Guangdong Wanlima Industry Ltd (SZSE:300591 investor three-year losses grow to 47% as the stock sheds CN¥369m this past week

It is doubtless a positive to see that the Guangdong Wanlima Industry Co. ,Ltd (SZSE:300591) share price has gained some 32% in the last three months. But that doesn't help the fact that the three year return is less impressive. Truth be told the share price declined 47% in three years and that return, Dear Reader, falls short of what you could have got from passive investing with an index fund.

After losing 17% this past week, it's worth investigating the company's fundamentals to see what we can infer from past performance.

View our latest analysis for Guangdong Wanlima Industry Ltd

Guangdong Wanlima Industry Ltd 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. 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 three years, Guangdong Wanlima Industry Ltd saw its revenue grow by 24% per year, compound. That's well above most other pre-profit companies. While its revenue increased, the share price dropped at a rate of 14% per year. That seems like an unlucky result for holders. It's possible that the prior share price assumed unrealistically high future growth. Before considering a purchase, investors should consider how quickly expenses are growing, relative to revenue.

The company's revenue and earnings (over time) are depicted in the image below (click to see the exact numbers).

Balance sheet strength is crucial. It might be well worthwhile taking a look at our free report on how its financial position has changed over time.

A Different Perspective

Investors in Guangdong Wanlima Industry Ltd had a tough year, with a total loss of 29%, against a market gain of about 14%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. Regrettably, last year's performance caps off a bad run, with the shareholders facing a total loss of 4% 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. 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. Like risks, for instance. Every company has them, and we've spotted 3 warning signs for Guangdong Wanlima Industry Ltd (of which 2 are significant!) you should know about.

If you would prefer to check out another company -- one with potentially superior financials -- then do not miss this free list of companies that have proven they can 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.