It is doubtless a positive to see that the SGSG Science&Technology Co., Ltd. Zhuhai (SZSE:300561) share price has gained some 32% in the last three months. But that doesn't change the fact that the returns over the last year have been less than pleasing. In fact, the price has declined 26% in a year, falling short of the returns you could get by investing in an index fund.

On a more encouraging note the company has added CN¥555m to its market cap in just the last 7 days, so let's see if we can determine what's driven the one-year loss for shareholders.

Because SGSG Science&Technology Zhuhai 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. That's because fast revenue growth can be easily extrapolated to forecast profits, often of considerable size.

SGSG Science&Technology Zhuhai's revenue didn't grow at all in the last year. In fact, it fell 29%. That looks pretty grim, at a glance. The stock price has languished lately, falling 26% in a year. That seems pretty reasonable given the lack of both profits and revenue growth. It's hard to escape the conclusion that buyers must envision either growth down the track, cost cutting, or both.

The company's revenue and earnings (over time) are depicted in the image below (click to see the exact numbers).

This free interactive report on SGSG Science&Technology Zhuhai'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 17% in the twelve months, SGSG Science&Technology Zhuhai shareholders did even worse, losing 26% (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. Unfortunately, last year's performance may indicate unresolved challenges, given that it was worse than the annualised loss of 4% 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. I find it very interesting to look at share price over the long term as a proxy for business performance. But to truly gain insight, we need to consider other information, too. Case in point: We've spotted 2 warning signs for SGSG Science&Technology Zhuhai you should be aware of.

We will like SGSG Science&Technology Zhuhai 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.