The three-year earnings decline has likely contributed toKunshan Kersen Science & TechnologyLtd's (SHSE:603626) shareholders losses of 38% over that period

In order to justify the effort of selecting individual stocks, it's worth striving to beat the returns from a market index fund. But the risk of stock picking is that you will likely buy under-performing companies. We regret to report that long term Kunshan Kersen Science & Technology Co.,Ltd. (SHSE:603626) shareholders have had that experience, with the share price dropping 38% in three years, versus a market decline of about 23%. And more recent buyers are having a tough time too, with a drop of 20% in the last year. Even worse, it's down 16% in about a month, which isn't fun at all.

Since Kunshan Kersen Science & TechnologyLtd has shed CN¥336m 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 Kunshan Kersen Science & TechnologyLtd

Because Kunshan Kersen Science & TechnologyLtd 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. 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, Kunshan Kersen Science & TechnologyLtd's revenue dropped 14% per year. That is not a good result. The stock has disappointed holders over the last three years, falling 11%, annualized. And with no profits, and weak revenue, are you surprised? However, in this kind of situation you can sometimes find opportunity, where sentiment is negative but the company is actually making good progress.

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

If you are thinking of buying or selling Kunshan Kersen Science & TechnologyLtd stock, you should check out this FREE detailed report on its balance sheet.

A Different Perspective

While the broader market lost about 12% in the twelve months, Kunshan Kersen Science & TechnologyLtd shareholders did even worse, losing 20% (even including dividends). 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 6% 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. Consider risks, for instance. Every company has them, and we've spotted 3 warning signs for Kunshan Kersen Science & TechnologyLtd you should know about.

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.

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

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.