Shareholders in China CITIC Financial Asset Management (HKG:2799) have lost 83%, as stock drops 6.5% this past week

We're definitely into long term investing, but some companies are simply bad investments over any time frame. We really hate to see fellow investors lose their hard-earned money. Spare a thought for those who held China CITIC Financial Asset Management Co., Ltd. (HKG:2799) for five whole years - as the share price tanked 83%. And we doubt long term believers are the only worried holders, since the stock price has declined 36% over the last twelve months. The falls have accelerated recently, with the share price down 27% in the last three months. While a drop like that is definitely a body blow, money isn't as important as health and happiness.

Since China CITIC Financial Asset Management has shed HK$1.6b 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 China CITIC Financial Asset Management

China CITIC Financial Asset Management wasn't profitable in the last twelve months, it is unlikely we'll see a strong correlation between its share price and its earnings per share (EPS). Arguably revenue is our next best option. 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.

Over half a decade China CITIC Financial Asset Management reduced its trailing twelve month revenue by 41% for each year. That's definitely a weaker result than most pre-profit companies report. So it's not that strange that the share price dropped 13% per year in that period. This kind of price performance makes us very wary, especially when combined with falling revenue. Of course, the poor performance could mean the market has been too severe selling down. That can happen.

You can see how earnings and revenue have changed over time in the image below (click on the chart to see the exact values).

This free interactive report on China CITIC Financial Asset Management's balance sheet strength is a great place to start, if you want to investigate the stock further.

A Different Perspective

While the broader market lost about 8.5% in the twelve months, China CITIC Financial Asset Management shareholders did even worse, losing 36%. 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 13% 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. Consider risks, for instance. Every company has them, and we've spotted 2 warning signs for China CITIC Financial Asset Management you should know about.

But note: China CITIC Financial Asset Management may not be the best stock to buy. So take a peek at this free list of interesting companies with past earnings growth (and further growth forecast).

Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on Hong Kong 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.