Shareholders in Jinyuan EP (SZSE:000546) have lost 56%, as stock drops 15% this past week

Generally speaking long term investing is the way to go. But along the way some stocks are going to perform badly. For example, after five long years the Jinyuan EP Co., Ltd. (SZSE:000546) share price is a whole 57% lower. That is extremely sub-optimal, to say the least. We also note that the stock has performed poorly over the last year, with the share price down 52%. Shareholders have had an even rougher run lately, with the share price down 28% in the last 90 days.

If the past week is anything to go by, investor sentiment for Jinyuan EP isn't positive, so let's see if there's a mismatch between fundamentals and the share price.

View our latest analysis for Jinyuan EP

Jinyuan EP wasn't profitable in the last twelve months, it is unlikely we'll see a strong correlation between its share price and its earnings per share (EPS). Arguably revenue is our next best option. Generally speaking, companies without profits are expected to grow revenue every year, and at a good clip. That's because it's hard to be confident a company will be sustainable if revenue growth is negligible, and it never makes a profit.

Over half a decade Jinyuan EP reduced its trailing twelve month revenue by 15% for each 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 9% (annualized) in the same time period. We don't generally like to own companies that lose money and don't grow revenues. You might be better off spending your money on a leisure activity. This looks like a really risky stock to buy, at a glance.

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 Jinyuan EP's financial health with this free report on its balance sheet.

A Different Perspective

While the broader market lost about 10% in the twelve months, Jinyuan EP shareholders did even worse, losing 52%. However, it could simply be that the share price has been impacted by broader market jitters. It might be worth keeping an eye on the fundamentals, in case there's a good opportunity. Regrettably, last year's performance caps off a bad run, with the shareholders facing a total loss of 9% 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. 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. Case in point: We've spotted 1 warning sign for Jinyuan EP you should be aware of.

For those who like to find winning investments this free list of undervalued companies with recent insider purchasing, could be just the ticket.

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.