Strong week for Shenzhen Worldunion Group (SZSE:002285) shareholders doesn't alleviate pain of three-year loss

Shenzhen Worldunion Group Incorporated (SZSE:002285) shareholders should be happy to see the share price up 28% in the last month. But that doesn't change the fact that the returns over the last three years have been stomach churning. The share price has sunk like a leaky ship, down 73% in that time. So it sure is nice to see a bit of an improvement. But the more important question is whether the underlying business can justify a higher price still.

While the last three years has been tough for Shenzhen Worldunion Group shareholders, this past week has shown signs of promise. So let's look at the longer term fundamentals and see if they've been the driver of the negative returns.

Check out our latest analysis for Shenzhen Worldunion Group

Because Shenzhen Worldunion Group 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. When a company doesn't make profits, we'd generally hope to see good revenue growth. That's because fast revenue growth can be easily extrapolated to forecast profits, often of considerable size.

In the last three years Shenzhen Worldunion Group saw its revenue shrink by 29% per year. That means its revenue trend is very weak compared to other loss making companies. The swift share price decline at an annual compound rate of 20%, reflects this weak fundamental performance. We prefer leave it to clowns to try to catch falling knives, like this stock. It's worth remembering that investors call buying a steeply falling share price 'catching a falling knife' because it is a dangerous pass time.

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

This free interactive report on Shenzhen Worldunion Group's balance sheet strength is a great place to start, if you want to investigate the stock further.

A Different Perspective

While the broader market lost about 19% in the twelve months, Shenzhen Worldunion Group shareholders did even worse, losing 35%. 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, last year's performance may indicate unresolved challenges, given that it was worse than the annualised loss of 8% 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. For instance, we've identified 2 warning signs for Shenzhen Worldunion Group that you should be aware of.

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.