Shareholders in Kangmei Pharmaceutical (SHSE:600518) are in the red if they invested five years ago

Generally speaking long term investing is the way to go. But that doesn't mean long term investors can avoid big losses. For example the Kangmei Pharmaceutical Co., Ltd. (SHSE:600518) share price dropped 52% over five years. That's an unpleasant experience for long term holders.

Since shareholders are down over the longer term, lets look at the underlying fundamentals over the that time and see if they've been consistent with returns.

View our latest analysis for Kangmei Pharmaceutical

Given that Kangmei Pharmaceutical only made minimal earnings in the last twelve months, we'll focus on revenue to gauge its business development. As a general rule, we think this kind of company is more comparable to loss-making stocks, since the actual profit is so low. It would be hard to believe in a more profitable future without growing revenues.

Over half a decade Kangmei Pharmaceutical reduced its trailing twelve month revenue by 30% for each year. That's definitely a weaker result than most pre-profit companies report. It seems appropriate, then, that the share price slid about 9% annually during that time. It's fair to say most investors don't like to invest in loss making companies with falling revenue. This looks like a really risky stock to buy, at a glance.

You can see how earnings and revenue have changed over time in the image below (click on the chart to see the exact values).

Take a more thorough look at Kangmei Pharmaceutical's financial health with this free report on its balance sheet.

A Different Perspective

While the broader market lost about 10% in the twelve months, Kangmei Pharmaceutical shareholders did even worse, losing 17%. 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 9% per year over five years. 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. To that end, you should be aware of the 1 warning sign we've spotted with Kangmei Pharmaceutical .

If you like to buy stocks alongside management, then you might just love this free list of companies. (Hint: many of them are unnoticed AND have attractive valuation).

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.