For many investors, the main point of stock picking is to generate higher returns than the overall market. But the risk of stock picking is that you will likely buy under-performing companies. Unfortunately, that's been the case for longer term Shenzhen Yitoa Intelligent Control Co.,Ltd. (SZSE:300131) shareholders, since the share price is down 30% in the last three years, falling well short of the market decline of around 9.7%. On the other hand the share price has bounced 6.4% over the last week.

While the last three years has been tough for Shenzhen Yitoa Intelligent ControlLtd 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.

View our latest analysis for Shenzhen Yitoa Intelligent ControlLtd

We don't think that Shenzhen Yitoa Intelligent ControlLtd's modest trailing twelve month profit has the market's full attention at the moment. We think revenue is probably a better guide. As a general rule, we think this kind of company is more comparable to loss-making stocks, since the actual profit is so low. For shareholders to have confidence a company will grow profits significantly, it must grow revenue.

Over the last three years, Shenzhen Yitoa Intelligent ControlLtd's revenue dropped 34% per year. That means its revenue trend is very weak compared to other loss making companies. On the face of it we'd posit the share price fall of 9% compound, over three years is well justified by the fundamental deterioration. 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.

The company's revenue and earnings (over time) are depicted in the image below (click to see the exact numbers).

If you are thinking of buying or selling Shenzhen Yitoa Intelligent ControlLtd stock, you should check out this FREE detailed report on its balance sheet.

A Different Perspective

It's nice to see that Shenzhen Yitoa Intelligent ControlLtd shareholders have received a total shareholder return of 9.8% over the last year. That gain is better than the annual TSR over five years, which is 2%. Therefore it seems like sentiment around the company has been positive lately. In the best case scenario, this may hint at some real business momentum, implying that now could be a great time to delve deeper. While it is well worth considering the different impacts that market conditions can have on the share price, there are other factors that are even more important. To that end, you should learn about the 2 warning signs we've spotted with Shenzhen Yitoa Intelligent ControlLtd (including 1 which is concerning) .

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 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.