Investors in Shanghai Shenda (SHSE:600626) from five years ago are still down 62%, even after 12% gain this past week

Shanghai Shenda Co., Ltd (SHSE:600626) shareholders should be happy to see the share price up 12% in the last week. But that doesn't change the fact that the returns over the last half decade have been disappointing. In fact, the share price has declined rather badly, down some 62% in that time. So we're not so sure if the recent bounce should be celebrated. But it could be that the fall was overdone.

On a more encouraging note the company has added CN¥370m to its market cap in just the last 7 days, so let's see if we can determine what's driven the five-year loss for shareholders.

View our latest analysis for Shanghai Shenda

Shanghai Shenda isn't currently profitable, so most analysts would look to revenue growth to get an idea of how fast the underlying business is growing. Shareholders of unprofitable companies usually desire strong revenue growth. As you can imagine, fast revenue growth, when maintained, often leads to fast profit growth.

In the last five years Shanghai Shenda saw its revenue shrink by 6.6% per year. That's not what investors generally want to see. The share price decline of 10% compound, over five years, is understandable given the company is losing money, and revenue is moving in the wrong direction. We don't think anyone is rushing to buy this stock. Not that many investors like to invest in companies that are losing money and not growing revenue.

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

Take a more thorough look at Shanghai Shenda's financial health with this free report on its balance sheet.

A Different Perspective

We regret to report that Shanghai Shenda shareholders are down 25% for the year. Unfortunately, that's worse than the broader market decline of 17%. However, it could simply be that the share price has been impacted by broader market jitters. It might be worth keeping an eye on the fundamentals, in case there's a good opportunity. Regrettably, last year's performance caps off a bad run, with the shareholders facing a total loss of 10% per year over five years. 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 Shanghai Shenda better, we need to consider many other factors. To that end, you should learn about the 2 warning signs we've spotted with Shanghai Shenda (including 1 which makes us a bit uncomfortable) .

For those who like to find winning investments this free list of undervalued companies with recent insider purchasing, could be just the ticket.

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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com