Over the last month the Guangdong Golden Dragon Development Inc. (SZSE:000712) has been much stronger than before, rebounding by 69%. If you look at the last three years, the stock price is down. But on the bright side, its return of -22%, is better than the market, which is down 26%.

While the last three years has been tough for Guangdong Golden Dragon Development shareholders, this past week has shown signs of promise. So let's look at the longer term fundamentals and see if they've been the driver of the negative returns.

Guangdong Golden Dragon Development 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. That's because it's hard to be confident a company will be sustainable if revenue growth is negligible, and it never makes a profit.

In the last three years Guangdong Golden Dragon Development saw its revenue shrink by 75% per year. That's definitely a weaker result than most pre-profit companies report. Revenue is dropping off fast, and so too is revenue, which is down 7% per year in that time. A modest loss is often easily justified when a company is growing revenues. But otherwise it can be hard to stomach.

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

If you are thinking of buying or selling Guangdong Golden Dragon Development stock, you should check out this FREE detailed report on its balance sheet.

A Different Perspective

Although it hurts that Guangdong Golden Dragon Development returned a loss of 11% in the last twelve months, the broader market was actually worse, returning a loss of 18%. Longer term investors wouldn't be so upset, since they would have made 1.9%, 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 Guangdong Golden Dragon Development better, we need to consider many other factors. Consider for instance, the ever-present spectre of investment risk. We've identified 2 warning signs with Guangdong Golden Dragon Development (at least 1 which is a bit concerning) , and understanding them should be part of your investment process.

Of course Guangdong Golden Dragon Development 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