Long term investing works well, but it doesn't always work for each individual stock. It hits us in the gut when we see fellow investors suffer a loss. Anyone who held Dongzhu Ecological Environment Protection Co., Ltd. (SHSE:603359) for five years would be nursing their metaphorical wounds since the share price dropped 71% in that time. And we doubt long term believers are the only worried holders, since the stock price has declined 68% over the last twelve months. Furthermore, it's down 29% in about a quarter. That's not much fun for holders.

With the stock having lost 20% in the past week, it's worth taking a look at business performance and seeing if there's any red flags.

Dongzhu Ecological Environment Protection 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. When a company doesn't make profits, we'd generally hope to see good revenue growth. As you can imagine, fast revenue growth, when maintained, often leads to fast profit growth.

Over half a decade Dongzhu Ecological Environment Protection reduced its trailing twelve month revenue by 13% for each year. That puts it in an unattractive cohort, to put it mildly. So it's not altogether surprising to see the share price down 11% per year in the same time period. This kind of price performance makes us very wary, especially when combined with falling revenue. Of course, the poor performance could mean the market has been too severe selling down. That can happen.

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

If you are thinking of buying or selling Dongzhu Ecological Environment Protection stock, you should check out this FREE detailed report on its balance sheet.

A Different Perspective

While the broader market lost about 10% in the twelve months, Dongzhu Ecological Environment Protection shareholders did even worse, losing 68% (even including dividends). 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 11% 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. It's always interesting to track share price performance over the longer term. But to understand Dongzhu Ecological Environment Protection better, we need to consider many other factors. Even so, be aware that Dongzhu Ecological Environment Protection is showing 1 warning sign in our investment analysis , you should know about...

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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.