Investors can approximate the average market return by buying an index fund. Active investors aim to buy stocks that vastly outperform the market - but in the process, they risk under-performance. That downside risk was realized by DongGuan Winnerway Industry Zone LTD. (SZSE:000573) shareholders over the last year, as the share price declined 32%. That's disappointing when you consider the market declined 25%. Longer term investors have fared much better, since the share price is up 13% in three years. Unfortunately the share price momentum is still quite negative, with prices down 19% in thirty days. But this could be related to poor market conditions -- stocks are down 13% in the same time.

Since DongGuan Winnerway Industry Zone has shed CN¥408m from its value in the past 7 days, let's see if the longer term decline has been driven by the business' economics.

Because DongGuan Winnerway Industry Zone 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. Some companies are willing to postpone profitability to grow revenue faster, but in that case one does expect good top-line growth.

In just one year DongGuan Winnerway Industry Zone saw its revenue fall by 55%. If you think that's a particularly bad result, you're statistically on the money No surprise, then, that the share price fell 32% over the year. We would want to see improvements in the core business, and diminishing losses, before getting too excited about this one.

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

Balance sheet strength is crucial. It might be well worthwhile taking a look at our free report on how its financial position has changed over time.

A Different Perspective

While the broader market lost about 25% in the twelve months, DongGuan Winnerway Industry Zone shareholders did even worse, losing 30% (even including dividends). 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. On the bright side, long term shareholders have made money, with a gain of 1.0% per year over half a decade. If the fundamental data continues to indicate long term sustainable growth, the current sell-off could be an opportunity worth considering. 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 - DongGuan Winnerway Industry Zone has 2 warning signs 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.

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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.