In order to justify the effort of selecting individual stocks, it's worth striving to beat the returns from a market index fund. But its virtually certain that sometimes you will buy stocks that fall short of the market average returns. We regret to report that long term Huayi Brothers Media Corporation (SZSE:300027) shareholders have had that experience, with the share price dropping 46% in three years, versus a market decline of about 7.2%. Unfortunately the share price momentum is still quite negative, with prices down 12% in thirty days.

With the stock having lost 10% 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 Huayi Brothers Media

Given that Huayi Brothers Media 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. Some companies are willing to postpone profitability to grow revenue faster, but in that case one does expect good top-line growth.

In the last three years Huayi Brothers Media saw its revenue shrink by 37% per year. That means its revenue trend is very weak compared to other loss making companies. With revenue in decline, the share price decline of 13% per year is hardly undeserved. The key question now is whether the company has the capacity to fund itself to profitability, without more cash. Of course, it is possible for businesses to bounce back from a revenue drop - but we'd want to see that before getting interested.

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

Take a more thorough look at Huayi Brothers Media's financial health with this free report on its balance sheet.

A Different Perspective

It's nice to see that Huayi Brothers Media shareholders have received a total shareholder return of 26% over the last year. Notably the five-year annualised TSR loss of 6% per year compares very unfavourably with the recent share price performance. This makes us a little wary, but the business might have turned around its fortunes. 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. Take risks, for example - Huayi Brothers Media has 1 warning sign we think you should be aware of.

Of course Huayi Brothers Media may not be the best stock to buy. So you may wish to see this free collection of growth stocks.

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.