As an investor, mistakes are inevitable. But really bad investments should be rare. So consider, for a moment, the misfortune of Shinry Technologies Co., Ltd. (SZSE:300745) investors who have held the stock for three years as it declined a whopping 77%. That would be a disturbing experience. The more recent news is of little comfort, with the share price down 43% in a year. More recently, the share price has dropped a further 23% in a month.

Since Shinry Technologies has shed CN¥388m from its value in the past 7 days, let's see if the longer term decline has been driven by the business' economics.

Because Shinry Technologies 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. Some companies are willing to postpone profitability to grow revenue faster, but in that case one would hope for good top-line growth to make up for the lack of earnings.

In the last three years, Shinry Technologies saw its revenue grow by 17% per year, compound. That's a fairly respectable growth rate. So it's hard to believe the share price decline of 21% per year is due to the revenue. It could be that the losses were much larger than expected. This is exactly why investors need to diversify - even when a loss making company grows revenue, it can fail to deliver for shareholders.

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

Take a more thorough look at Shinry Technologies' financial health with this free report on its balance sheet.

A Different Perspective

Shinry Technologies shareholders are down 43% for the year, but the market itself is up 6.1%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. Regrettably, last year's performance caps off a bad run, with the shareholders facing a total loss of 7% 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. It's always interesting to track share price performance over the longer term. But to understand Shinry Technologies better, we need to consider many other factors. To that end, you should be aware of the 1 warning sign we've spotted with Shinry Technologies .

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.