Shenzhen CDL Precision Technology Co., Ltd (SZSE:300686) shareholders will doubtless be very grateful to see the share price up 32% in the last quarter. But don't envy holders -- looking back over 5 years the returns have been really bad. Indeed, the share price is down 52% in the period. So is the recent increase sufficient to restore confidence in the stock? Not yet. Of course, this could be the start of a turnaround.

While the stock has risen 18% in the past week but long term shareholders are still in the red, let's see what the fundamentals can tell us.

Shenzhen CDL Precision Technology 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. As you can imagine, fast revenue growth, when maintained, often leads to fast profit growth.

Over half a decade Shenzhen CDL Precision Technology reduced its trailing twelve month revenue by 3.9% for each 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. Not that many investors like to invest in companies that are losing money and not growing revenue.

The image below shows how earnings and revenue have tracked over time (if you click on the image you can see greater detail).

Balance sheet strength is crucial. It might be well worthwhile taking a look at our free report on how its financial position has changed over time.

A Different Perspective

Shenzhen CDL Precision Technology shareholders are down 8.8% for the year, but the market itself is up 3.3%. Even the share prices of good stocks drop sometimes, but we want to see improvements in the fundamental metrics of a business, before getting too interested. Unfortunately, longer term shareholders are suffering worse, given the loss of 9% doled out over the last five years. We would want clear information suggesting the company will grow, before taking the view that the share price will stabilize. It's always interesting to track share price performance over the longer term. But to understand Shenzhen CDL Precision Technology better, we need to consider many other factors. Case in point: We've spotted 2 warning signs for Shenzhen CDL Precision Technology you should be aware of.

If you are like me, then you will not want to miss this free list of undervalued small caps that insiders are 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.