Shareholders in Zhejiang Furun Digital TechnologyLTD (SHSE:600070) have lost 87%, as stock drops 18% this past week

Long term investing works well, but it doesn't always work for each individual stock. It hits us in the gut when we see fellow investors suffer a loss. For example, we sympathize with anyone who was caught holding Zhejiang Furun Digital Technology CO.,LTD (SHSE:600070) during the five years that saw its share price drop a whopping 88%. We also note that the stock has performed poorly over the last year, with the share price down 42%. Unfortunately the share price momentum is still quite negative, with prices down 20% in thirty days. We do note, however, that the broader market is down 8.8% in that period, and this may have weighed on the share price. We really hope anyone holding through that price crash has a diversified portfolio. Even when you lose money, you don't have to lose the lesson.

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

View our latest analysis for Zhejiang Furun Digital TechnologyLTD

Because Zhejiang Furun Digital TechnologyLTD made a loss in the last twelve months, we think the market is probably more focussed on revenue and revenue growth, at least for now. When a company doesn't make profits, we'd generally hope to see good revenue growth. That's because fast revenue growth can be easily extrapolated to forecast profits, often of considerable size.

In the last five years Zhejiang Furun Digital TechnologyLTD saw its revenue shrink by 57% per year. That puts it in an unattractive cohort, to put it mildly. So it's not altogether surprising to see the share price down 13% per year in the same time period. This kind of price performance makes us very wary, especially when combined with falling revenue. Ironically, that behavior could create an opportunity for the contrarian investor - but only if there are good reasons to predict a brighter future.

The company's revenue and earnings (over time) are depicted in the image below (click to see the exact numbers).

If you are thinking of buying or selling Zhejiang Furun Digital TechnologyLTD stock, you should check out this FREE detailed report on its balance sheet.

A Different Perspective

Investors in Zhejiang Furun Digital TechnologyLTD had a tough year, with a total loss of 42%, against a market gain of about 6.1%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. Unfortunately, last year's performance may indicate unresolved challenges, given that it was worse than the annualised loss of 13% 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. 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. Case in point: We've spotted 2 warning signs for Zhejiang Furun Digital TechnologyLTD you should be aware of.

If you are like me, then you will not want to miss this free list of undervalued small caps that insiders are buying.

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.