Shanghai Guao Electronic Technology Co., Ltd. (SZSE:300551) shareholders should be happy to see the share price up 21% in the last quarter. But that doesn't change the reality of under-performance over the last twelve months. In fact, the price has declined 36% in a year, falling short of the returns you could get by investing in an index fund.

After losing 16% this past week, it's worth investigating the company's fundamentals to see what we can infer from past performance.

Because Shanghai Guao Electronic Technology 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. When a company doesn't make profits, we'd generally hope to see good 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.

Shanghai Guao Electronic Technology's revenue didn't grow at all in the last year. In fact, it fell 43%. That looks pretty grim, at a glance. Shareholders have seen the share price drop 36% 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.

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

Take a more thorough look at Shanghai Guao Electronic Technology's financial health with this free report on its balance sheet.

A Different Perspective

Shanghai Guao Electronic Technology shareholders are down 36% for the year, but the market itself is up 11%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. On the bright side, long term shareholders have made money, with a gain of 1.4% per year over half a decade. It could be that the recent sell-off is an opportunity, so it may be worth checking the fundamental data for signs of a long term growth trend. 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. Case in point: We've spotted 2 warning signs for Shanghai Guao Electronic Technology you should be aware of.

If you are like me, then you will not want to miss this free list of undervalued small caps that insiders are buying.

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.