It's nice to see the Zhejiang RIFA Precision Machinery Co., Ltd. (SZSE:002520) share price up 12% in a week. Meanwhile over the last three years the stock has dropped hard. In that time, the share price dropped 52%. So the improvement may be a real relief to some. Perhaps the company has turned over a new leaf.

The recent uptick of 12% could be a positive sign of things to come, so let's take a look at historical fundamentals.

Because Zhejiang RIFA Precision Machinery 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 desire strong revenue growth. As you can imagine, fast revenue growth, when maintained, often leads to fast profit growth.

In the last three years, Zhejiang RIFA Precision Machinery saw its revenue grow by 0.8% per year, compound. That's not a very high growth rate considering it doesn't make profits. This uninspiring revenue growth has no doubt helped send the share price lower; it dropped 15% during the period. When a stock falls hard like this, some investors like to add the company to a watchlist (in case the business recovers, longer term). After all, growing a business isn't easy, and the process will not always be smooth.

The graphic below depicts how earnings and revenue have changed over time (unveil the exact values by clicking on the image).

This free interactive report on Zhejiang RIFA Precision Machinery'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 Zhejiang RIFA Precision Machinery shareholders are down 28% for the year. Unfortunately, that's worse than the broader market decline of 18%. 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. For example, we've discovered 1 warning sign for Zhejiang RIFA Precision Machinery that you should be aware of before investing here.

We will like Zhejiang RIFA Precision Machinery better if we see some big insider buys. While we wait, check out this free list of undervalued stocks (mostly small caps) 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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com