Further weakness as Zhongfu Information (SZSE:300659) drops 12% this week, taking three-year losses to 69%

If you love investing in stocks you're bound to buy some losers. But the long term shareholders of Zhongfu Information Inc. (SZSE:300659) have had an unfortunate run in the last three years. Unfortunately, they have held through a 69% decline in the share price in that time. The more recent news is of little comfort, with the share price down 48% in a year. Furthermore, it's down 29% in about a quarter. That's not much fun for holders.

If the past week is anything to go by, investor sentiment for Zhongfu Information isn't positive, so let's see if there's a mismatch between fundamentals and the share price.

See our latest analysis for Zhongfu Information

Given that Zhongfu Information didn't make a profit in the last twelve months, we'll focus on revenue growth to form a quick view of its business development. Generally speaking, companies without profits are expected to grow revenue every year, and at a good clip. Some companies are willing to postpone profitability to grow revenue faster, but in that case one would hope for good top-line growth to make up for the lack of earnings.

Over the last three years, Zhongfu Information's revenue dropped 17% per year. That means its revenue trend is very weak compared to other loss making companies. With no profits and falling revenue it is no surprise that investors have been dumping the stock, pushing the price down by 19% per year over that time. Bagholders or 'baggies' are people who buy more of a stock as the price collapses. They are then left 'holding the bag' if the shares turn out to be worthless. After losing money on a declining business with falling stock price, we always consider whether eager bagholders are still offering us a reasonable exit price.

The graphic below depicts how earnings and revenue have changed over time (unveil the exact values by clicking on the image).

If you are thinking of buying or selling Zhongfu Information stock, you should check out this FREE detailed report on its balance sheet.

A Different Perspective

While the broader market lost about 10% in the twelve months, Zhongfu Information shareholders did even worse, losing 48%. 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 8% 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. It's always interesting to track share price performance over the longer term. But to understand Zhongfu Information better, we need to consider many other factors. Take risks, for example - Zhongfu Information has 2 warning signs (and 1 which makes us a bit uncomfortable) we think you should know about.

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.