Market is not liking Dongguan Eontec's (SZSE:300328) earnings decline as stock retreats 9.8% this week

The main aim of stock picking is to find the market-beating stocks. But the main game is to find enough winners to more than offset the losers At this point some shareholders may be questioning their investment in Dongguan Eontec Co., Ltd. (SZSE:300328), since the last five years saw the share price fall 29%. On top of that, the share price is down 9.8% in the last week.

With the stock having lost 9.8% in the past week, it's worth taking a look at business performance and seeing if there's any red flags.

Check out our latest analysis for Dongguan Eontec

While Dongguan Eontec made a small profit, in the last year, we think that the market is probably more focussed on the top line growth at the moment. As a general rule, we think this kind of company is more comparable to loss-making stocks, since the actual profit is so low. For shareholders to have confidence a company will grow profits significantly, it must grow revenue.

In the last half decade, Dongguan Eontec saw its revenue increase by 15% per year. That's a pretty good rate for a long time period. Shareholders have seen the share price fall at 5% per year, for five years: a poor performance. Those who bought back then clearly believed in stronger growth - and maybe even profits. The lesson is that if you buy shares in a money losing company you could end up losing money.

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

This free interactive report on Dongguan Eontec's balance sheet strength is a great place to start, if you want to investigate the stock further.

A Different Perspective

Dongguan Eontec provided a TSR of 5.8% over the last twelve months. But that was short of the market average. But at least that's still a gain! Over five years the TSR has been a reduction of 5% per year, over five years. So this might be a sign the business has turned its fortunes around. It's always interesting to track share price performance over the longer term. But to understand Dongguan Eontec better, we need to consider many other factors. Consider for instance, the ever-present spectre of investment risk. We've identified 4 warning signs with Dongguan Eontec (at least 1 which is a bit unpleasant) , and understanding them should be part of your investment process.

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.