It's easy to match the overall market return by buying an index fund. While individual stocks can be big winners, plenty more fail to generate satisfactory returns. Unfortunately the New Guomai Digital Culture Co., Ltd. (SHSE:600640) share price slid 24% over twelve months. That contrasts poorly with the market decline of 10%. Taking the longer term view, the stock fell 20% over the last three years. The share price has dropped 28% in three months.

Given the past week has been tough on shareholders, let's investigate the fundamentals and see what we can learn.

Because New Guomai Digital Culture 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. When a company doesn't make profits, we'd generally hope to see good revenue growth. That's because fast revenue growth can be easily extrapolated to forecast profits, often of considerable size.

In just one year New Guomai Digital Culture saw its revenue fall by 23%. That's not what investors generally want to see. The stock price has languished lately, falling 24% in a year. What would you expect when revenue is falling, and it doesn't make a profit? It's hard to escape the conclusion that buyers must envision either growth down the track, cost cutting, or both.

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

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

A Different Perspective

While the broader market lost about 10% in the twelve months, New Guomai Digital Culture shareholders did even worse, losing 24% (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. Regrettably, last year's performance caps off a bad run, with the shareholders facing a total loss of 4% 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. 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 - New Guomai Digital Culture has 1 warning sign we think you should be aware of.

But note: New Guomai Digital Culture 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.