As an investor its worth striving to ensure your overall portfolio beats the market average. But the risk of stock picking is that you will likely buy under-performing companies. We regret to report that long term Xiangxue Pharmaceutical Co.,Ltd. (SZSE:300147) shareholders have had that experience, with the share price dropping 49% in three years, versus a market decline of about 29%. And more recent buyers are having a tough time too, with a drop of 25% in the last year. More recently, the share price has dropped a further 18% in a month. But this could be related to poor market conditions -- stocks are down 8.4% in the same time.

Since Xiangxue PharmaceuticalLtd has shed CN¥397m from its value in the past 7 days, let's see if the longer term decline has been driven by the business' economics.

See our latest analysis for Xiangxue PharmaceuticalLtd

Because Xiangxue PharmaceuticalLtd 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. Shareholders of unprofitable companies usually expect strong revenue growth. As you can imagine, fast revenue growth, when maintained, often leads to fast profit growth.

Over the last three years, Xiangxue PharmaceuticalLtd's revenue dropped 15% per year. That means its revenue trend is very weak compared to other loss making companies. On the face of it we'd posit the share price fall of 14% compound, over three years is well justified by the fundamental deterioration. It would probably be worth asking whether the company can fund itself to profitability. The company will need to return to revenue growth as quickly as possible, if it wants to see some enthusiasm from investors.

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

This free interactive report on Xiangxue PharmaceuticalLtd's balance sheet strength is a great place to start, if you want to investigate the stock further.

A Different Perspective

We regret to report that Xiangxue PharmaceuticalLtd shareholders are down 25% for the year. Unfortunately, that's worse than the broader market decline of 21%. Having said that, it's inevitable that some stocks will be oversold in a falling market. The key is to keep your eyes on the fundamental developments. Unfortunately, last year's performance may indicate unresolved challenges, given that it was worse than the annualised loss of 6% 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. 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. Case in point: We've spotted 1 warning sign for Xiangxue PharmaceuticalLtd you should be aware of.

We will like Xiangxue PharmaceuticalLtd better if we see some big insider buys. While we wait, check out this free list of growing companies with considerable, recent, insider buying.

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.