For many, the main point of investing is to generate higher returns than the overall market. But even the best stock picker will only win with some selections. So we wouldn't blame long term ENC Digital Technology Co., Ltd (SHSE:603869) shareholders for doubting their decision to hold, with the stock down 29% over a half decade. Unfortunately the share price momentum is still quite negative, with prices down 17% in thirty days. However, we note the price may have been impacted by the broader market, which is down 8.4% in the same time period.

After losing 12% this past week, it's worth investigating the company's fundamentals to see what we can infer from past performance.

Check out our latest analysis for ENC Digital Technology

Given that ENC Digital Technology 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. When a company doesn't make profits, we'd generally expect to see good revenue growth. 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 five years ENC Digital Technology saw its revenue shrink by 30% per year. That's definitely a weaker result than most pre-profit companies report. It seems pretty reasonable to us that the share price dipped 5% per year in that time. We doubt many shareholders are delighted with this share price performance. It is possible for businesses to bounce back but as Buffett says, 'turnarounds seldom turn'.

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

If you are thinking of buying or selling ENC Digital Technology stock, you should check out this FREE detailed report on its balance sheet.

A Different Perspective

Although it hurts that ENC Digital Technology returned a loss of 11% in the last twelve months, the broader market was actually worse, returning a loss of 21%. Unfortunately, last year's performance may indicate unresolved challenges, given that it's worse than the annualised loss of 5% over the last half decade. While some investors do well specializing in buying companies that are struggling (but nonetheless undervalued), don't forget that Buffett said that 'turnarounds seldom turn'. While it is well worth considering the different impacts that market conditions can have on the share price, there are other factors that are even more important. Take risks, for example - ENC Digital Technology has 1 warning sign we think you should be aware of.

Of course, you might find a fantastic investment by looking elsewhere. So take a peek at this free list of companies we expect will grow earnings.

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

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.
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.