Investing in stocks inevitably means buying into some companies that perform poorly. But long term Guangdong SACA Precision Manufacturing Co., Ltd. (SZSE:300464) shareholders have had a particularly rough ride in the last three year. Regrettably, they have had to cope with a 68% drop in the share price over that period. The more recent news is of little comfort, with the share price down 32% in a year. More recently, the share price has dropped a further 27% in a month. We do note, however, that the broader market is down 13% in that period, and this may have weighed on the share price.

With the stock having lost 18% in the past week, it's worth taking a look at business performance and seeing if there's any red flags.

Because Guangdong SACA Precision Manufacturing 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. That's because fast revenue growth can be easily extrapolated to forecast profits, often of considerable size.

In the last three years Guangdong SACA Precision Manufacturing saw its revenue shrink by 41% per year. That's definitely a weaker result than most pre-profit companies report. Arguably, the market has responded appropriately to this business performance by sending the share price down 19% (annualized) in the same time period. When revenue is dropping, and losses are still costing, and the share price sinking fast, it's fair to ask if something is remiss. After losing money on a declining business with falling stock price, we always consider whether eager bagholders are still offering us a reasonable exit price.

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

Take a more thorough look at Guangdong SACA Precision Manufacturing's financial health with this free report on its balance sheet.

A Different Perspective

While the broader market lost about 24% in the twelve months, Guangdong SACA Precision Manufacturing shareholders did even worse, losing 32%. However, it could simply be that the share price has been impacted by broader market jitters. It might be worth keeping an eye on the fundamentals, in case there's a good opportunity. Regrettably, last year's performance caps off a bad run, with the shareholders facing a total loss of 6% per year over five years. Generally speaking long term share price weakness can be a bad sign, though contrarian investors might want to research the stock in hope of a turnaround. It's always interesting to track share price performance over the longer term. But to understand Guangdong SACA Precision Manufacturing better, we need to consider many other factors. For instance, we've identified 2 warning signs for Guangdong SACA Precision Manufacturing (1 is significant) that you should be aware of.

Of course Guangdong SACA Precision Manufacturing 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.