Earnings are growing at Daqing Huake (SZSE:000985) but shareholders still don't like its prospects

Investors can approximate the average market return by buying an index fund. When you buy individual stocks, you can make higher profits, but you also face the risk of under-performance. For example, the Daqing Huake Company Limited (SZSE:000985) share price is down 18% in the last year. That falls noticeably short of the market decline of around 10%. The silver lining (for longer term investors) is that the stock is still 0.7% higher than it was three years ago. Unfortunately the share price momentum is still quite negative, with prices down 17% in thirty days.

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 Daqing Huake

Given that Daqing Huake only made minimal earnings in the last twelve months, we'll focus on revenue to gauge its business development. Generally speaking, we'd consider a stock like this alongside loss-making companies, simply because the quantum of the profit is so low. It would be hard to believe in a more profitable future without growing revenues.

In just one year Daqing Huake saw its revenue fall by 29%. That looks pretty grim, at a glance. The stock price has languished lately, falling 18% in a year. What would you expect when revenue is falling, and it doesn't make a profit? We think most holders must believe revenue growth will improve, or else costs will decline.

The image below shows how earnings and revenue have tracked over time (if you click on the image you can see greater detail).

If you are thinking of buying or selling Daqing Huake stock, you should check out this FREE detailed report on its balance sheet.

A Different Perspective

We regret to report that Daqing Huake shareholders are down 18% for the year (even including dividends). Unfortunately, that's worse than the broader market decline of 10%. 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 3% 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. It's always interesting to track share price performance over the longer term. But to understand Daqing Huake better, we need to consider many other factors. Even so, be aware that Daqing Huake is showing 2 warning signs in our investment analysis , and 1 of those makes us a bit uncomfortable...

Of course Daqing Huake 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.