Market is not liking Zhewen Interactive Group's (SHSE:600986) earnings decline as stock retreats 13% this week

Investors can approximate the average market return by buying an index fund. Active investors aim to buy stocks that vastly outperform the market - but in the process, they risk under-performance. For example, the Zhewen Interactive Group Co., Ltd. (SHSE:600986) share price is down 30% in the last year. That's well below the market decline of 16%. On the other hand, the stock is actually up 9.1% over three years. The last week also saw the share price slip down another 13%.

After losing 13% this past week, it's worth investigating the company's fundamentals to see what we can infer from past performance.

View our latest analysis for Zhewen Interactive Group

Given that Zhewen Interactive Group 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. For shareholders to have confidence a company will grow profits significantly, it must grow revenue.

In just one year Zhewen Interactive Group saw its revenue fall by 22%. That looks pretty grim, at a glance. The stock price has languished lately, falling 30% in a year. 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.

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

We're pleased to report that the CEO is remunerated more modestly than most CEOs at similarly capitalized companies. It's always worth keeping an eye on CEO pay, but a more important question is whether the company will grow earnings throughout the years. You can see what analysts are predicting for Zhewen Interactive Group in this interactive graph of future profit estimates.

A Different Perspective

We regret to report that Zhewen Interactive Group shareholders are down 30% for the year. Unfortunately, that's worse than the broader market decline of 16%. 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. Regrettably, last year's performance caps off a bad run, with the shareholders facing a total loss of 1.4% 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. 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. To that end, you should be aware of the 2 warning signs we've spotted with Zhewen Interactive Group .

We will like Zhewen Interactive Group better if we see some big insider buys. While we wait, check out this free list of growing companies with considerable, recent, insider 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.