Hengxin Shambala CultureLtd (SZSE:300081 shareholders incur further losses as stock declines 11% this week, taking three-year losses to 59%

The truth is that if you invest for long enough, you're going to end up with some losing stocks. But the last three years have been particularly tough on longer term Hengxin Shambala Culture Co.,Ltd. (SZSE:300081) shareholders. Unfortunately, they have held through a 59% decline in the share price in that time. The more recent news is of little comfort, with the share price down 34% in a year. More recently, the share price has dropped a further 30% in a month.

Since Hengxin Shambala CultureLtd has shed CN¥496m 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 Hengxin Shambala CultureLtd

Because Hengxin Shambala CultureLtd 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 it's hard to be confident a company will be sustainable if revenue growth is negligible, and it never makes a profit.

In the last three years Hengxin Shambala CultureLtd saw its revenue shrink by 2.2% per year. That is not a good result. The share price decline of 17% compound, over three years, is understandable given the company doesn't have profits to boast of, and revenue is moving in the wrong direction. Of course, it's the future that will determine whether today's price is a good one. We'd be pretty wary of this one until it makes a profit, because we don't specialize in finding turnaround situations.

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 Hengxin Shambala CultureLtd stock, you should check out this FREE detailed report on its balance sheet.

A Different Perspective

Investors in Hengxin Shambala CultureLtd had a tough year, with a total loss of 34%, against a market gain of about 7.2%. Even the share prices of good stocks drop sometimes, but we want to see improvements in the fundamental metrics of a business, before getting too interested. Regrettably, last year's performance caps off a bad run, with the shareholders facing a total loss of 7% 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. 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 3 warning signs for Hengxin Shambala CultureLtd that 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.