Strong week for Qinghai Spring Medicinal Resources Technology (SHSE:600381) shareholders doesn't alleviate pain of one-year loss

Over the last month the Qinghai Spring Medicinal Resources Technology Co., Ltd. (SHSE:600381) has been much stronger than before, rebounding by 64%. But that's not enough to compensate for the decline over the last twelve months. During that time the share price has sank like a stone, descending 64%. Some might say the recent bounce is to be expected after such a bad drop. Of course, it could be that the fall was overdone.

While the stock has risen 16% in the past week but long term shareholders are still in the red, let's see what the fundamentals can tell us.

View our latest analysis for Qinghai Spring Medicinal Resources Technology

Qinghai Spring Medicinal Resources Technology isn't currently profitable, so most analysts would look to revenue growth to get an idea of how fast the underlying business is growing. 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 the last twelve months, Qinghai Spring Medicinal Resources Technology increased its revenue by 71%. That's well above most other pre-profit companies. Meanwhile, the share price slid 64%. Typically a growth stock like this will be volatile, with some shareholders concerned about the red ink on the bottom line (that is, the losses). Generally speaking investors would consider a stock like this less risky once it turns a profit. But when do you think that will happen?

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

Balance sheet strength is crucial. It might be well worthwhile taking a look at our free report on how its financial position has changed over time.

A Different Perspective

We regret to report that Qinghai Spring Medicinal Resources Technology shareholders are down 64% for the year. Unfortunately, that's worse than the broader market decline of 18%. 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 6% 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. It's always interesting to track share price performance over the longer term. But to understand Qinghai Spring Medicinal Resources Technology better, we need to consider many other factors. Consider for instance, the ever-present spectre of investment risk. We've identified 2 warning signs with Qinghai Spring Medicinal Resources Technology , and understanding them should be part of your investment process.

Of course Qinghai Spring Medicinal Resources Technology 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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com