Strong week for Nanjing Huamai Technology (SHSE:603042) shareholders doesn't alleviate pain of one-year loss

It's nice to see the Nanjing Huamai Technology Co., Ltd. (SHSE:603042) share price up 13% in a week. But that doesn't change the fact that the returns over the last year have been disappointing. Like an arid lake in a warming world, shareholder value has evaporated, with the share price down 54% in that time. So the bounce should be viewed in that context. You could argue that the sell-off was too severe.

The recent uptick of 13% could be a positive sign of things to come, so let's take a look at historical fundamentals.

See our latest analysis for Nanjing Huamai Technology

Nanjing Huamai Technology isn't currently profitable, so most analysts would look to revenue growth to get an idea of how fast the underlying business is growing. Generally speaking, companies without profits are expected to grow revenue every year, and at a good clip. That's because fast revenue growth can be easily extrapolated to forecast profits, often of considerable size.

Nanjing Huamai Technology's revenue didn't grow at all in the last year. In fact, it fell 11%. That looks pretty grim, at a glance. In the absence of profits, it's not unreasonable that the share price fell 54%. Fingers crossed this is the low ebb for the stock. We have a natural aversion to companies that are losing money and shrinking revenue. But perhaps that is being too careful.

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

You can see how its balance sheet has strengthened (or weakened) over time in this free interactive graphic.

A Different Perspective

While the broader market lost about 16% in the twelve months, Nanjing Huamai Technology shareholders did even worse, losing 54%. 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. Regrettably, last year's performance caps off a bad run, with the shareholders facing a total loss of 4% 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. I find it very interesting to look at share price over the long term as a proxy for business performance. But to truly gain insight, we need to consider other information, too. For example, we've discovered 2 warning signs for Nanjing Huamai Technology that you should be aware of before investing here.

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