Investors are selling off Hubei Guangji Pharmaceutical (SZSE:000952), lack of profits no doubt contribute to shareholders one-year loss

While it may not be enough for some shareholders, we think it is good to see the Hubei Guangji Pharmaceutical Co., Ltd. (SZSE:000952) share price up 14% in a single quarter. But in truth the last year hasn't been good for the share price. The cold reality is that the stock has dropped 26% in one year, under-performing the market.

Since Hubei Guangji Pharmaceutical has shed CN¥343m from its value in the past 7 days, let's see if the longer term decline has been driven by the business' economics.

Check out our latest analysis for Hubei Guangji Pharmaceutical

Given that Hubei Guangji Pharmaceutical didn't make a profit in the last twelve months, we'll focus on revenue growth to form a quick view of its business development. Shareholders of unprofitable companies usually desire strong revenue growth. That's because fast revenue growth can be easily extrapolated to forecast profits, often of considerable size.

Hubei Guangji Pharmaceutical's revenue didn't grow at all in the last year. In fact, it fell 14%. That looks pretty grim, at a glance. Shareholders have seen the share price drop 26% in that time. What would you expect when revenue is falling, and it doesn't make a profit? We think most holders must believe revenue growth will improve, or else costs will decline.

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

Hubei Guangji Pharmaceutical shareholders are down 26% for the year, but the market itself is up 14%. Even the share prices of good stocks drop sometimes, but we want to see improvements in the fundamental metrics of a business, before getting too interested. Unfortunately, last year's performance may indicate unresolved challenges, given that it was worse than the annualised loss of 4% over the last half decade. 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. Take risks, for example - Hubei Guangji Pharmaceutical has 2 warning signs we think you should be aware of.

We will like Hubei Guangji Pharmaceutical better if we see some big insider buys. While we wait, check out this free list of undervalued stocks (mostly small caps) 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.