As an investor, mistakes are inevitable. But you have a problem if you face massive losses more than once in a while. So spare a thought for the long term shareholders of Kingdee International Software Group Company Limited (HKG:268); the share price is down a whopping 70% in the last three years. That would certainly shake our confidence in the decision to own the stock. The more recent news is of little comfort, with the share price down 32% in a year. Unfortunately the share price momentum is still quite negative, with prices down 10% in thirty days.

While the stock has risen 3.5% in the past week but long term shareholders are still in the red, let's see what the fundamentals can tell us.

Given that Kingdee International Software Group didn't make a profit in the last twelve months, we'll focus on revenue growth to form a quick view of its business development. Generally speaking, companies without profits are expected to grow revenue every year, and at a good clip. As you can imagine, fast revenue growth, when maintained, often leads to fast profit growth.

In the last three years, Kingdee International Software Group saw its revenue grow by 16% per year, compound. That's a pretty good rate of top-line growth. So it's hard to believe the share price decline of 19% per year is due to the revenue. More likely, the market was spooked by the cost of that revenue. If you buy into companies that lose money then you always risk losing money yourself. Just don't lose the lesson.

The image below shows how earnings and revenue have tracked over time (if you click on the image you can see greater detail).

Kingdee International Software Group is a well known stock, with plenty of analyst coverage, suggesting some visibility into future growth. If you are thinking of buying or selling Kingdee International Software Group stock, you should check out this free report showing analyst consensus estimates for future profits.

A Different Perspective

Investors in Kingdee International Software Group had a tough year, with a total loss of 32%, against a market gain of about 2.3%. Even the share prices of good stocks drop sometimes, but we want to see improvements in the fundamental metrics of a business, before getting too interested. Unfortunately, last year's performance may indicate unresolved challenges, given that it was worse than the annualised loss of 0.7% 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 Kingdee International Software Group better, we need to consider many other factors. To that end, you should be aware of the 1 warning sign we've spotted with Kingdee International Software Group .

Of course, you might find a fantastic investment by looking elsewhere. So take a peek at this free list of companies we expect will grow earnings.

Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on Hong Kong 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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com