For many investors, the main point of stock picking is to generate higher returns than the overall market. But in any portfolio, there are likely to be some stocks that fall short of that benchmark. We regret to report that long term Yangmei Chemical Co.,Ltd (SHSE:600691) shareholders have had that experience, with the share price dropping 46% in three years, versus a market decline of about 22%. And more recent buyers are having a tough time too, with a drop of 40% in the last year. Furthermore, it's down 28% in about a quarter. That's not much fun for holders.

After losing 9.0% this past week, it's worth investigating the company's fundamentals to see what we can infer from past performance.

Because Yangmei ChemicalLtd made a loss in the last twelve months, we think the market is probably more focussed on revenue and revenue growth, at least for now. Generally speaking, companies without profits are expected to grow revenue every year, and at a good clip. That's because fast revenue growth can be easily extrapolated to forecast profits, often of considerable size.

Over the last three years, Yangmei ChemicalLtd's revenue dropped 15% per year. That's definitely a weaker result than most pre-profit companies report. With revenue in decline, the share price decline of 13% per year is hardly undeserved. The key question now is whether the company has the capacity to fund itself to profitability, without more cash. The company will need to return to revenue growth as quickly as possible, if it wants to see some enthusiasm from investors.

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

If you are thinking of buying or selling Yangmei ChemicalLtd stock, you should check out this FREE detailed report on its balance sheet.

A Different Perspective

While the broader market lost about 15% in the twelve months, Yangmei ChemicalLtd shareholders did even worse, losing 40%. However, it could simply be that the share price has been impacted by broader market jitters. It might be worth keeping an eye on the fundamentals, in case there's a good opportunity. Regrettably, last year's performance caps off a bad run, with the shareholders facing a total loss of 6% 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. You might want to assess this data-rich visualization of its earnings, revenue and cash flow.

Of course Yangmei ChemicalLtd 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.

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