Loss-making Guangdong Guanghua Sci-Tech (SZSE:002741) sheds a further CN¥387m, taking total shareholder losses to 42% over 1 year

The simplest way to benefit from a rising market is to buy an index fund. When you buy individual stocks, you can make higher profits, but you also face the risk of under-performance. Unfortunately the Guangdong Guanghua Sci-Tech Co., Ltd. (SZSE:002741) share price slid 42% over twelve months. That falls noticeably short of the market decline of around 12%. We note that it has not been easy for shareholders over three years, either; the share price is down 38% in that time. The falls have accelerated recently, with the share price down 19% in the last three months.

Given the past week has been tough on shareholders, let's investigate the fundamentals and see what we can learn.

View our latest analysis for Guangdong Guanghua Sci-Tech

Guangdong Guanghua Sci-Tech 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. 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.

In just one year Guangdong Guanghua Sci-Tech saw its revenue fall by 20%. That's not what investors generally want to see. Shareholders have seen the share price drop 42% in that time. That seems pretty reasonable given the lack of both profits and revenue growth. It's hard to escape the conclusion that buyers must envision either growth down the track, cost cutting, or both.

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

If you are thinking of buying or selling Guangdong Guanghua Sci-Tech stock, you should check out this FREE detailed report on its balance sheet.

A Different Perspective

We regret to report that Guangdong Guanghua Sci-Tech shareholders are down 42% for the year. Unfortunately, that's worse than the broader market decline of 12%. 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 3% over the last half decade. 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. Consider for instance, the ever-present spectre of investment risk. We've identified 1 warning sign with Guangdong Guanghua Sci-Tech , and understanding them should be part of your investment process.

Of course Guangdong Guanghua Sci-Tech 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.