Investors in Shanghai Welltech AutomationLtd (SZSE:002058) from five years ago are still down 41%, even after 18% gain this past week

It's nice to see the Shanghai Welltech Automation Co.,Ltd. (SZSE:002058) share price up 18% in a week. But if you look at the last five years the returns have not been good. After all, the share price is down 41% in that time, significantly under-performing the market.

While the last five years has been tough for Shanghai Welltech AutomationLtd shareholders, this past week has shown signs of promise. So let's look at the longer term fundamentals and see if they've been the driver of the negative returns.

See our latest analysis for Shanghai Welltech AutomationLtd

Because Shanghai Welltech AutomationLtd 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. That's because fast revenue growth can be easily extrapolated to forecast profits, often of considerable size.

In the last half decade, Shanghai Welltech AutomationLtd saw its revenue increase by 9.8% per year. That's a pretty good rate for a long time period. Shareholders have seen the share price fall at 7% per year, for five years: a poor performance. Clearly, the expectations from back then have not been satisfied. The lesson is that if you buy shares in a money losing company you could end up losing money.

The company's revenue and earnings (over time) are depicted in the image below (click to see the exact numbers).

Take a more thorough look at Shanghai Welltech AutomationLtd's financial health with this free report on its balance sheet.

A Different Perspective

While the broader market lost about 17% in the twelve months, Shanghai Welltech AutomationLtd shareholders did even worse, losing 29%. 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. Unfortunately, last year's performance may indicate unresolved challenges, given that it was worse than the annualised loss of 7% 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. 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 Shanghai Welltech AutomationLtd (1 can't be ignored!) that you should be aware of before investing here.

We will like Shanghai Welltech AutomationLtd better if we see some big insider buys. While we wait, check out this free list of undervalued stocks (mostly small caps) with considerable, recent, insider buying.

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