Investors can approximate the average market return by buying an index fund. While individual stocks can be big winners, plenty more fail to generate satisfactory returns. That downside risk was realized by Elion Energy Company Limited (SHSE:600277) shareholders over the last year, as the share price declined 40%. That's disappointing when you consider the market declined 9.8%. The silver lining (for longer term investors) is that the stock is still 8.2% higher than it was three years ago. Shareholders have had an even rougher run lately, with the share price down 10% in the last 90 days. However, one could argue that the price has been influenced by the general market, which is down 5.4% in the same timeframe.

If the past week is anything to go by, investor sentiment for Elion Energy isn't positive, so let's see if there's a mismatch between fundamentals and the share price.

See our latest analysis for Elion Energy

While Elion Energy made a small profit, in the last year, we think that the market is probably more focussed on the top line growth at the moment. 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.

Elion Energy's revenue didn't grow at all in the last year. In fact, it fell 22%. That looks pretty grim, at a glance. Shareholders have seen the share price drop 40% in that time. What would you expect when revenue is falling, and it doesn't make a profit? We think most holders must believe revenue growth will improve, or else costs will decline.

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

You can see how its balance sheet has strengthened (or weakened) over time in this free interactive graphic.

A Different Perspective

While the broader market lost about 9.8% in the twelve months, Elion Energy shareholders did even worse, losing 40% (even including dividends). 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 5% 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. 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. Consider for instance, the ever-present spectre of investment risk. We've identified 4 warning signs with Elion Energy (at least 1 which is concerning) , and understanding them should be part of your investment process.

We will like Elion Energy better if we see some big insider buys. While we wait, check out this free list of growing companies with considerable, recent, insider 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.