Kangxin New Materials (SHSE:600076) adds CN¥350m to market cap in the past 7 days, though investors from five years ago are still down 59%

Kangxin New Materials Co., Ltd (SHSE:600076) shareholders should be happy to see the share price up 26% in the last month. But don't envy holders -- looking back over 5 years the returns have been really bad. In that time the share price has delivered a rude shock to holders, who find themselves down 59% after a long stretch. Some might say the recent bounce is to be expected after such a bad drop. But it could be that the fall was overdone.

While the stock has risen 18% in the past week but long term shareholders are still in the red, let's see what the fundamentals can tell us.

View our latest analysis for Kangxin New Materials

Kangxin New Materials isn't currently profitable, so most analysts would look to revenue growth to get an idea of how fast the underlying business is growing. Shareholders of unprofitable companies usually desire strong 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.

Over half a decade Kangxin New Materials reduced its trailing twelve month revenue by 37% for each year. That puts it in an unattractive cohort, to put it mildly. It seems appropriate, then, that the share price slid about 10% annually during that time. It's fair to say most investors don't like to invest in loss making companies with falling revenue. This looks like a really risky stock to buy, at a glance.

You can see how earnings and revenue have changed over time in the image below (click on the chart to see the exact values).

Take a more thorough look at Kangxin New Materials' financial health with this free report on its balance sheet.

A Different Perspective

We regret to report that Kangxin New Materials shareholders are down 37% for the year. Unfortunately, that's worse than the broader market decline of 14%. 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 10% per year over five years. 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. To that end, you should be aware of the 3 warning signs we've spotted with Kangxin New Materials .

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.