The simplest way to benefit from a rising market is to buy an index fund. Active investors aim to buy stocks that vastly outperform the market - but in the process, they risk under-performance. Unfortunately the Fujian Nebula Electronics Co., Ltd. (SZSE:300648) share price slid 46% over twelve months. That contrasts poorly with the market decline of 16%. To make matters worse, the returns over three years have also been really disappointing (the share price is 37% lower than three years ago). The falls have accelerated recently, with the share price down 23% in the last three months.
Given the past week has been tough on shareholders, let's investigate the fundamentals and see what we can learn.
Because Fujian Nebula Electronics 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. Shareholders of unprofitable companies usually desire strong revenue growth. That's because fast revenue growth can be easily extrapolated to forecast profits, often of considerable size.
Fujian Nebula Electronics' revenue didn't grow at all in the last year. In fact, it fell 4.1%. That looks pretty grim, at a glance. The stock price has languished lately, falling 46% in a year. That seems pretty reasonable given the lack of both profits and revenue growth. It's hard to escape the conclusion that buyers must envision either growth down the track, cost cutting, or both.
You can see how earnings and revenue have changed over time in the image below (click on the chart to see the exact values).
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 the broader market lost about 16% in the twelve months, Fujian Nebula Electronics shareholders did even worse, losing 46% (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 1.2% 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. For example, we've discovered 3 warning signs for Fujian Nebula Electronics that you should be aware of before investing here.
Of course Fujian Nebula Electronics 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.