Shareholders in Zhejiang Yatai Pharmaceutical (SZSE:002370) have lost 51%, as stock drops 12% this past week

We think intelligent long term investing is the way to go. But no-one is immune from buying too high. To wit, the Zhejiang Yatai Pharmaceutical Co., Ltd. (SZSE:002370) share price managed to fall 51% over five long years. That's an unpleasant experience for long term holders. And some of the more recent buyers are probably worried, too, with the stock falling 26% in the last year. The last week also saw the share price slip down another 12%.

Given the past week has been tough on shareholders, let's investigate the fundamentals and see what we can learn.

Check out our latest analysis for Zhejiang Yatai Pharmaceutical

Because Zhejiang Yatai Pharmaceutical 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. Generally speaking, companies without profits are expected to grow revenue every year, and at a good clip. That's because fast revenue growth can be easily extrapolated to forecast profits, often of considerable size.

In the last five years Zhejiang Yatai Pharmaceutical saw its revenue shrink by 11% per year. That's definitely a weaker result than most pre-profit companies report. Arguably, the market has responded appropriately to this business performance by sending the share price down 9% (annualized) in the same time period. 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.

The image below shows how earnings and revenue have tracked over time (if you click on the image you can see greater detail).

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

A Different Perspective

While the broader market gained around 11% in the last year, Zhejiang Yatai Pharmaceutical shareholders lost 26%. 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 9% 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 Zhejiang Yatai Pharmaceutical better, we need to consider many other factors. To that end, you should be aware of the 1 warning sign we've spotted with Zhejiang Yatai Pharmaceutical .

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.