Ideally, your overall portfolio should beat the market average. But even the best stock picker will only win with some selections. At this point some shareholders may be questioning their investment in Shandong Iron and Steel Company Ltd. (SHSE:600022), since the last five years saw the share price fall 34%.

With that in mind, it's worth seeing if the company's underlying fundamentals have been the driver of long term performance, or if there are some discrepancies.

Shandong Iron and Steel isn't currently profitable, so most analysts would look to revenue growth to get an idea of how fast the underlying business is growing. Generally speaking, companies without profits are expected to grow revenue every year, and at a good clip. That's because it's hard to be confident a company will be sustainable if revenue growth is negligible, and it never makes a profit.

In the last half decade, Shandong Iron and Steel saw its revenue increase by 12% per year. That's a fairly respectable growth rate. Shareholders have seen the share price fall at 6% per year, for five years: a poor performance. Clearly, the expectations from back then have not been satisfied. There is always a big risk of losing money yourself when you buy shares in a company that loses money.

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 Shandong Iron and Steel's financial health with this free report on its balance sheet.

What About Dividends?

As well as measuring the share price return, investors should also consider the total shareholder return (TSR). Whereas the share price return only reflects the change in the share price, the TSR includes the value of dividends (assuming they were reinvested) and the benefit of any discounted capital raising or spin-off. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. As it happens, Shandong Iron and Steel's TSR for the last 5 years was -28%, which exceeds the share price return mentioned earlier. This is largely a result of its dividend payments!

A Different Perspective

While it's certainly disappointing to see that Shandong Iron and Steel shares lost 14% throughout the year, that wasn't as bad as the market loss of 16%. 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'. It's always interesting to track share price performance over the longer term. But to understand Shandong Iron and Steel better, we need to consider many other factors. Consider for instance, the ever-present spectre of investment risk. We've identified 2 warning signs with Shandong Iron and Steel , and understanding them should be part of your investment process.

But note: Shandong Iron and Steel may not be the best stock to buy. So take a peek at this free list of interesting companies with past earnings growth (and further growth forecast).

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.