Further weakness as Aoyuan Beauty Valley TechnologyLtd (SZSE:000615) drops 10% this week, taking three-year losses to 90%

As every investor would know, not every swing hits the sweet spot. But you want to avoid the really big losses like the plague. So spare a thought for the long term shareholders of Aoyuan Beauty Valley Technology Co.,Ltd. (SZSE:000615); the share price is down a whopping 90% in the last three years. That'd be enough to cause even the strongest minds some disquiet. Even worse, it's down 13% in about a month, which isn't fun at all. We really feel for shareholders in this scenario. It's a good reminder of the importance of diversification, and it's worth keeping in mind there's more to life than money, anyway.

Since Aoyuan Beauty Valley TechnologyLtd has shed CN¥191m from its value in the past 7 days, let's see if the longer term decline has been driven by the business' economics.

View our latest analysis for Aoyuan Beauty Valley TechnologyLtd

Aoyuan Beauty Valley TechnologyLtd isn't currently profitable, so most analysts would look to revenue growth to get an idea of how fast the underlying business is growing. Generally speaking, companies without profits are expected to grow revenue every year, and at a good clip. That's because it's hard to be confident a company will be sustainable if revenue growth is negligible, and it never makes a profit.

Over the last three years, Aoyuan Beauty Valley TechnologyLtd's revenue dropped 24% per year. That means its revenue trend is very weak compared to other loss making companies. And as you might expect the share price has been weak too, dropping at a rate of 24% per year. We prefer leave it to clowns to try to catch falling knives, like this stock. There is a good reason that investors often describe buying a sharply falling stock price as 'trying to catch a falling knife'. Think about it.

The company's revenue and earnings (over time) are depicted in the image below (click to see the exact numbers).

If you are thinking of buying or selling Aoyuan Beauty Valley TechnologyLtd stock, you should check out this FREE detailed report on its balance sheet.

A Different Perspective

While the broader market lost about 9.6% in the twelve months, Aoyuan Beauty Valley TechnologyLtd shareholders did even worse, losing 14%. 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. Unfortunately, longer term shareholders are suffering worse, given the loss of 10% doled out over the last five years. We'd need to see some sustained improvements in the key metrics before we could muster much enthusiasm. 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 - Aoyuan Beauty Valley TechnologyLtd has 1 warning sign we think you should be aware of.

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.