While it may not be enough for some shareholders, we think it is good to see the Yongyue Science&Technology Co.,Ltd (SHSE:603879) share price up 17% in a single quarter. But that is minimal compensation for the share price under-performance over the last year. After all, the share price is down 32% in the last year, significantly under-performing the market.
Since Yongyue Science&TechnologyLtd has shed CN¥415m from its value in the past 7 days, let's see if the longer term decline has been driven by the business' economics.
Because Yongyue Science&TechnologyLtd 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. That's because fast revenue growth can be easily extrapolated to forecast profits, often of considerable size.
In the last year Yongyue Science&TechnologyLtd saw its revenue grow by 5.1%. That's not a very high growth rate considering it doesn't make profits. Given this lacklustre revenue growth, the share price drop of 32% seems pretty appropriate. It's important not to lose sight of the fact that profitless companies must grow. But if you buy a loss making company then you could become a loss making investor.
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 Yongyue Science&TechnologyLtd stock, you should check out this FREE detailed report on its balance sheet.
A Different Perspective
While the broader market lost about 8.7% in the twelve months, Yongyue Science&TechnologyLtd shareholders did even worse, losing 32%. 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. Unfortunately, last year's performance may indicate unresolved challenges, given that it was worse than the annualised loss of 1.9% over the last half decade. Generally speaking long term share price weakness can be a bad sign, though contrarian investors might want to research the stock in hope of a turnaround. 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. For example, we've discovered 2 warning signs for Yongyue Science&TechnologyLtd that you should be aware of before investing here.
But note: Yongyue Science&TechnologyLtd may not be the best stock to buy. So take a peek at this free list of interesting companies with past earnings growth (and further growth forecast).
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on Chinese exchanges.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.
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.