Investing in stocks comes with the risk that the share price will fall. And unfortunately for Hunan Kaimeite Gases Co., Ltd. (SZSE:002549) shareholders, the stock is a lot lower today than it was a year ago. The share price has slid 50% in that time. Longer term shareholders haven't suffered as badly, since the stock is down a comparatively less painful 22% in three years. The falls have accelerated recently, with the share price down 28% in the last three months.

With the stock having lost 9.5% in the past week, it's worth taking a look at business performance and seeing if there's any red flags.

While Hunan Kaimeite Gases made a small profit, in the last year, we think that the market is probably more focussed on the top line growth at the moment. As a general rule, we think this kind of company is more comparable to loss-making stocks, since the actual profit is so low. For shareholders to have confidence a company will grow profits significantly, it must grow revenue.

Hunan Kaimeite Gases' revenue didn't grow at all in the last year. In fact, it fell 0.07%. That's not what investors generally want to see. The share price drop of 50% is understandable given the company doesn't have profits to boast of. Fingers crossed this is the low ebb for the stock. We have a natural aversion to companies that are losing money and shrinking revenue. But perhaps that is being too careful.

You can see how earnings and revenue have changed over time in the image below (click on the chart to see the exact values).

You can see how its balance sheet has strengthened (or weakened) over time in this free interactive graphic.

A Different Perspective

While the broader market lost about 13% in the twelve months, Hunan Kaimeite Gases shareholders did even worse, losing 50% (even including dividends). 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 0.4% 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. 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. Case in point: We've spotted 4 warning signs for Hunan Kaimeite Gases you should be aware of.

Of course Hunan Kaimeite Gases 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.