Investing in stocks inevitably means buying into some companies that perform poorly. But the long term shareholders of Henan Yuneng Holdings Co.,Ltd. (SZSE:001896) have had an unfortunate run in the last three years. Regrettably, they have had to cope with a 51% drop in the share price over that period. Shareholders have had an even rougher run lately, with the share price down 21% in the last 90 days.

Given the past week has been tough on shareholders, let's investigate the fundamentals and see what we can learn.

Henan Yuneng HoldingsLtd isn't currently profitable, so most analysts would look to revenue growth to get an idea of how fast the underlying business is growing. Shareholders of unprofitable companies usually desire strong revenue growth. Some companies are willing to postpone profitability to grow revenue faster, but in that case one would hope for good top-line growth to make up for the lack of earnings.

In the last three years, Henan Yuneng HoldingsLtd saw its revenue grow by 4.5% per year, compound. That's not a very high growth rate considering it doesn't make profits. It's likely this weak growth has contributed to an annualised return of 15% for the last three years. When a stock falls hard like this, some investors like to add the company to a watchlist (in case the business recovers, longer term). After all, growing a business isn't easy, and the process will not always be smooth.

The graphic below depicts how earnings and revenue have changed over time (unveil the exact values by clicking on the image).

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

While it's certainly disappointing to see that Henan Yuneng HoldingsLtd shares lost 4.9% throughout the year, that wasn't as bad as the market loss of 14%. Longer term investors wouldn't be so upset, since they would have made 2%, each year, over five years. It could be that the business is just facing some short term problems, but shareholders should keep a close eye on the fundamentals. It's always interesting to track share price performance over the longer term. But to understand Henan Yuneng HoldingsLtd better, we need to consider many other factors. Take risks, for example - Henan Yuneng HoldingsLtd has 2 warning signs (and 1 which doesn't sit too well with us) we think you should know about.

If you like to buy stocks alongside management, then you might just love this free list of companies. (Hint: many of them are unnoticed AND have attractive valuation).

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

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