Investors are selling off Puyi (NASDAQ:PUYI), lack of profits no doubt contribute to shareholders one-year loss

Investors can approximate the average market return by buying an index fund. When you buy individual stocks, you can make higher profits, but you also face the risk of under-performance. That downside risk was realized by Puyi Inc. (NASDAQ:PUYI) shareholders over the last year, as the share price declined 13%. That's well below the market decline of 7.3%. However, the longer term returns haven't been so bad, with the stock down 9.3% in the last three years. In the last ninety days we've seen the share price slide 32%.

With the stock having lost 17% in the past week, it's worth taking a look at business performance and seeing if there's any red flags.

See our latest analysis for Puyi

Given that Puyi didn't make a profit in the last twelve months, we'll focus on revenue growth to form a quick view of its business development. Generally speaking, companies without profits are expected to grow revenue every year, and at a good clip. As you can imagine, fast revenue growth, when maintained, often leads to fast profit growth.

In just one year Puyi saw its revenue fall by 1.3%. That's not what investors generally want to see. Shareholders have seen the share price drop 13% in that time. What would you expect when revenue is falling, and it doesn't make a profit? We think most holders must believe revenue growth will improve, or else costs will decline.

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

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

A Different Perspective

Puyi shareholders are down 13% for the year, falling short of the market return. The market shed around 7.3%, no doubt weighing on the stock price. Shareholders have lost 3.0% per year over the last three years, so the share price drop has become steeper, over the last year; a potential symptom of as yet unsolved challenges. We would be wary of buying into a company with unsolved problems, although some investors will buy into struggling stocks if they believe the price is sufficiently attractive. It's always interesting to track share price performance over the longer term. But to understand Puyi better, we need to consider many other factors. Consider for instance, the ever-present spectre of investment risk. We've identified 2 warning signs with Puyi (at least 1 which is significant) , and understanding them should be part of your investment process.

For those who like to find winning investments this free list of growing 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 US 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.