Investors can approximate the average market return by buying an index fund. While individual stocks can be big winners, plenty more fail to generate satisfactory returns. Investors in Leon Technology Co., Ltd. (SZSE:300603) have tasted that bitter downside in the last year, as the share price dropped 34%. That contrasts poorly with the market decline of 8.0%. However, the longer term returns haven't been so bad, with the stock down 15% in the last three years. More recently, the share price has dropped a further 12% in a month. Importantly, this could be a market reaction to the recently released financial results. You can check out the latest numbers in our company report.

After losing 10% this past week, it's worth investigating the company's fundamentals to see what we can infer from past performance.

Leon 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. Generally speaking, companies without profits are expected to grow revenue every year, and at a good clip. 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.

Leon Technology's revenue didn't grow at all in the last year. In fact, it fell 0.06%. That looks pretty grim, at a glance. Shareholders have seen the share price drop 34% in that time. That seems pretty reasonable given the lack of both profits and revenue growth. We think most holders must believe revenue growth will improve, or else costs will decline.

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

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 Leon Technology shareholders are down 34% for the year. Unfortunately, that's worse than the broader market decline of 8.0%. 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. Unfortunately, last year's performance may indicate unresolved challenges, given that it was worse than the annualised loss of 6% over the last half decade. Generally speaking long term share price weakness can be a bad sign, though contrarian investors might want to research the stock in hope of a turnaround. 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. For example, we've discovered 1 warning sign for Leon Technology that you should be aware of before investing here.

But note: Leon Technology may not be the best stock to buy. So take a peek at this free list of interesting companies with past earnings growth (and further growth forecast).

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.