Shareholders in iDreamSky Technology Holdings (HKG:1119) have lost 86%, as stock drops 13% this past week

Long term investing works well, but it doesn't always work for each individual stock. It hits us in the gut when we see fellow investors suffer a loss. For example, we sympathize with anyone who was caught holding iDreamSky Technology Holdings Limited (HKG:1119) during the five years that saw its share price drop a whopping 86%. And some of the more recent buyers are probably worried, too, with the stock falling 79% in the last year. Furthermore, it's down 52% in about a quarter. That's not much fun for holders. We really feel for shareholders in this scenario. It's a good reminder of the importance of diversification, and it's worth keeping in mind there's more to life than money, anyway.

With the stock having lost 13% in the past week, it's worth taking a look at business performance and seeing if there's any red flags.

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Because iDreamSky Technology Holdings 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. When a company doesn't make profits, we'd generally hope to see good revenue growth. 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 half a decade iDreamSky Technology Holdings reduced its trailing twelve month revenue by 16% for each year. That puts it in an unattractive cohort, to put it mildly. So it's not altogether surprising to see the share price down 13% per year in the same time period. We don't think this is a particularly promising picture. Of course, the poor performance could mean the market has been too severe selling down. That can happen.

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 iDreamSky Technology Holdings stock, you should check out this FREE detailed report on its balance sheet.

A Different Perspective

Investors in iDreamSky Technology Holdings had a tough year, with a total loss of 79%, against a market gain of about 33%. Even the share prices of good stocks drop sometimes, but we want to see improvements in the fundamental metrics of a business, before getting too interested. Regrettably, last year's performance caps off a bad run, with the shareholders facing a total loss of 13% 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. It's always interesting to track share price performance over the longer term. But to understand iDreamSky Technology Holdings better, we need to consider many other factors. Case in point: We've spotted 3 warning signs for iDreamSky Technology Holdings you should be aware of, and 1 of them is significant.

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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.