Statistically speaking, long term investing is a profitable endeavour. But unfortunately, some companies simply don't succeed. For example, after five long years the Shenzhen Deren Electronic Co., Ltd. (SZSE:002055) share price is a whole 54% lower. That's an unpleasant experience for long term holders. We also note that the stock has performed poorly over the last year, with the share price down 43%. Shareholders have had an even rougher run lately, with the share price down 24% in the last 90 days. However, one could argue that the price has been influenced by the general market, which is down 13% in the same timeframe.

If the past week is anything to go by, investor sentiment for Shenzhen Deren Electronic isn't positive, so let's see if there's a mismatch between fundamentals and the share price.

Shenzhen Deren Electronic wasn't profitable in the last twelve months, it is unlikely we'll see a strong correlation between its share price and its earnings per share (EPS). Arguably revenue is our next best option. Shareholders of unprofitable companies usually desire strong revenue growth. 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 five years Shenzhen Deren Electronic saw its revenue shrink by 3.0% per year. That's not what investors generally want to see. The share price decline of 9% compound, over five years, is understandable given the company is losing money, and revenue is moving in the wrong direction. We don't think anyone is rushing to buy this stock. Ultimately, it may be worth watching - should revenue pick up, the share price might follow.

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 Shenzhen Deren Electronic's financial health with this free report on its balance sheet.

A Different Perspective

We regret to report that Shenzhen Deren Electronic shareholders are down 43% for the year. Unfortunately, that's worse than the broader market decline of 19%. However, it could simply be that the share price has been impacted by broader market jitters. It might be worth keeping an eye on the fundamentals, in case there's a good opportunity. Regrettably, last year's performance caps off a bad run, with the shareholders facing a total loss of 9% per year over five years. 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 3 warning signs for Shenzhen Deren Electronic you should be aware of, and 2 of them are a bit concerning.

Of course Shenzhen Deren Electronic may not be the best stock to buy. So you may wish to see this free collection of growth stocks.

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.