Shareholders in Shenzhen Wongtee International Enterprise (SZSE:000056) have lost 68%, as stock drops 14% this past week

If you are building a properly diversified stock portfolio, the chances are some of your picks will perform badly. But the long term shareholders of Shenzhen Wongtee International Enterprise Co., Ltd. (SZSE:000056) have had an unfortunate run in the last three years. Regrettably, they have had to cope with a 68% drop in the share price over that period. And more recent buyers are having a tough time too, with a drop of 27% in the last year. Even worse, it's down 44% in about a month, which isn't fun at all.

Since Shenzhen Wongtee International Enterprise has shed CN¥472m 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 Shenzhen Wongtee International Enterprise

Given that Shenzhen Wongtee International Enterprise 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. When a company doesn't make profits, we'd generally hope to see good revenue growth. As you can imagine, fast revenue growth, when maintained, often leads to fast profit growth.

In the last three years, Shenzhen Wongtee International Enterprise saw its revenue grow by 11% per year, compound. That's a pretty good rate of top-line growth. So some shareholders would be frustrated with the compound loss of 19% per year. To be frank we're surprised to see revenue growth and share price growth diverge so strongly. It would be well worth taking a closer look at the company, to determine growth trends (and balance sheet strength).

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 Shenzhen Wongtee International Enterprise's financial health with this free report on its balance sheet.

A Different Perspective

Investors in Shenzhen Wongtee International Enterprise had a tough year, with a total loss of 27%, against a market gain of about 6.1%. 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 7% 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. Consider for instance, the ever-present spectre of investment risk. We've identified 2 warning signs with Shenzhen Wongtee International Enterprise , and understanding them should be part of your investment process.

If you would prefer to check out another company -- one with potentially superior financials -- then do not miss this free list of companies that have proven they can grow earnings.

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.