Shenzhen GuoHua Network Security Technology (SZSE:000004 shareholders incur further losses as stock declines 20% this week, taking five-year losses to 62%

Generally speaking long term investing is the way to go. But that doesn't mean long term investors can avoid big losses. To wit, the Shenzhen GuoHua Network Security Technology Co., Ltd. (SZSE:000004) share price managed to fall 62% over five long years. We certainly feel for shareholders who bought near the top. We also note that the stock has performed poorly over the last year, with the share price down 44%. Shareholders have had an even rougher run lately, with the share price down 37% in the last 90 days.

With the stock having lost 20% in the past week, it's worth taking a look at business performance and seeing if there's any red flags.

Check out our latest analysis for Shenzhen GuoHua Network Security Technology

Shenzhen GuoHua Network Security Technology 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. 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 half a decade Shenzhen GuoHua Network Security Technology reduced its trailing twelve month revenue by 8.5% for each year. That puts it in an unattractive cohort, to put it mildly. Arguably, the market has responded appropriately to this business performance by sending the share price down 10% (annualized) in the same time period. It's fair to say most investors don't like to invest in loss making companies with falling revenue. This looks like a really risky stock to buy, at a glance.

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

We're pleased to report that the CEO is remunerated more modestly than most CEOs at similarly capitalized companies. It's always worth keeping an eye on CEO pay, but a more important question is whether the company will grow earnings throughout the years. Before buying or selling a stock, we always recommend a close examination of historic growth trends, available here..

A Different Perspective

While the broader market lost about 10% in the twelve months, Shenzhen GuoHua Network Security Technology shareholders did even worse, losing 44%. 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. Unfortunately, last year's performance may indicate unresolved challenges, given that it was worse than the annualised loss of 10% 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. Even so, be aware that Shenzhen GuoHua Network Security Technology is showing 2 warning signs in our investment analysis , and 1 of those is a bit concerning...

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.