Passive investing in an index fund is a good way to ensure your own returns roughly match the overall market. But if you buy individual stocks, you can do both better or worse than that. That downside risk was realized by ShenZhen RoadRover Technology Co.,Ltd (SZSE:002813) shareholders over the last year, as the share price declined 19%. That contrasts poorly with the market decline of 12%. Longer term shareholders haven't suffered as badly, since the stock is down a comparatively less painful 9.5% in three years. The last month has also been disappointing, with the stock slipping a further 20%.

With the stock having lost 11% in the past week, it's worth taking a look at business performance and seeing if there's any red flags.

ShenZhen RoadRover TechnologyLtd 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. That's because fast revenue growth can be easily extrapolated to forecast profits, often of considerable size.

ShenZhen RoadRover TechnologyLtd's revenue didn't grow at all in the last year. In fact, it fell 18%. That looks pretty grim, at a glance. Shareholders have seen the share price drop 19% in that time. What would you expect when revenue is falling, and it doesn't make a profit? It's hard to escape the conclusion that buyers must envision either growth down the track, cost cutting, or both.

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

Take a more thorough look at ShenZhen RoadRover TechnologyLtd's financial health with this free report on its balance sheet.

A Different Perspective

While the broader market lost about 12% in the twelve months, ShenZhen RoadRover TechnologyLtd shareholders did even worse, losing 19%. 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. Regrettably, last year's performance caps off a bad run, with the shareholders facing a total loss of 3% 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. 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 ShenZhen RoadRover TechnologyLtd that you should be aware of before investing here.

Of course ShenZhen RoadRover TechnologyLtd 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.