Many investors define successful investing as beating the market average over the long term. But in any portfolio, there are likely to be some stocks that fall short of that benchmark. We regret to report that long term Jiangxi Hongdu Aviation Industry Co., Ltd. (SHSE:600316) shareholders have had that experience, with the share price dropping 44% in three years, versus a market decline of about 19%. The more recent news is of little comfort, with the share price down 28% in a year. On the other hand the share price has bounced 9.8% over the last week.

While the stock has risen 9.8% in the past week but long term shareholders are still in the red, let's see what the fundamentals can tell us.

While Jiangxi Hongdu Aviation Industry 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. Generally speaking, we'd consider a stock like this alongside loss-making companies, simply because the quantum of the profit is so low. For shareholders to have confidence a company will grow profits significantly, it must grow revenue.

In the last three years, Jiangxi Hongdu Aviation Industry saw its revenue grow by 1.4% per year, compound. That's not a very high growth rate considering it doesn't make profits. Indeed, the stock dropped 13% over the last three years. Shareholders will probably be hoping growth picks up soon. But the real upside for shareholders will be if the company can start generating profits.

You can see below how earnings and revenue have changed over time (discover the exact values by clicking on the image).

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

We regret to report that Jiangxi Hongdu Aviation Industry shareholders are down 28% for the year (even including dividends). Unfortunately, that's worse than the broader market decline of 14%. 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. Longer term investors wouldn't be so upset, since they would have made 4%, each year, over five years. It could be that the recent sell-off is an opportunity, so it may be worth checking the fundamental data for signs of a long term growth trend. 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. Consider for instance, the ever-present spectre of investment risk. We've identified 3 warning signs with Jiangxi Hongdu Aviation Industry (at least 1 which is a bit concerning) , and understanding them should be part of your investment process.

Of course Jiangxi Hongdu Aviation Industry 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.