Shareholders in Improve Medical Instruments (SZSE:300030) have lost 38%, as stock drops 19% this past week

Improve Medical Instruments Co., Ltd. (SZSE:300030) shareholders should be happy to see the share price up 19% in the last quarter. But that doesn't help the fact that the three year return is less impressive. After all, the share price is down 38% in the last three years, significantly under-performing the market.

Since Improve Medical Instruments has shed CN¥427m from its value in the past 7 days, let's see if the longer term decline has been driven by the business' economics.

See our latest analysis for Improve Medical Instruments

Improve Medical Instruments wasn't profitable in the last twelve months, it is unlikely we'll see a strong correlation between its share price and its earnings per share (EPS). Arguably revenue is our next best option. 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.

Over the last three years, Improve Medical Instruments' revenue dropped 11% per year. That is not a good result. The stock has disappointed holders over the last three years, falling 11%, annualized. That makes sense given the lack of either profits or revenue growth. Of course, sentiment could become too negative, and the company may actually be making progress to profitability.

You can see below how earnings and revenue have changed over time (discover the exact values by clicking on the image).

This free interactive report on Improve Medical Instruments' balance sheet strength is a great place to start, if you want to investigate the stock further.

A Different Perspective

While the broader market gained around 14% in the last year, Improve Medical Instruments shareholders lost 23%. 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 4% 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. 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 learn about the 2 warning signs we've spotted with Improve Medical Instruments (including 1 which is potentially serious) .

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.