We think intelligent long term investing is the way to go. But no-one is immune from buying too high. Zooming in on an example, the Tunghsu Azure Renewable Energy Co.,Ltd. (SZSE:000040) share price dropped 67% in the last half decade. That is extremely sub-optimal, to say the least. And we doubt long term believers are the only worried holders, since the stock price has declined 52% over the last twelve months. The falls have accelerated recently, with the share price down 32% in the last three months. We note that the company has reported results fairly recently; and the market is hardly delighted. You can check out the latest numbers in our company report.

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

Because Tunghsu Azure Renewable EnergyLtd 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. Generally speaking, companies without profits are expected to grow revenue every year, and at a good clip. That's because it's hard to be confident a company will be sustainable if revenue growth is negligible, and it never makes a profit.

In the last five years Tunghsu Azure Renewable EnergyLtd saw its revenue shrink by 32% per year. That puts it in an unattractive cohort, to put it mildly. It seems appropriate, then, that the share price slid about 11% annually during that time. It's fair to say most investors don't like to invest in loss making companies with falling revenue. This looks like a really risky stock to buy, at a glance.

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

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 17% in the twelve months, Tunghsu Azure Renewable EnergyLtd shareholders did even worse, losing 52%. Having said that, it's inevitable that some stocks will be oversold in a falling market. The key is to keep your eyes on the fundamental developments. Unfortunately, last year's performance may indicate unresolved challenges, given that it was worse than the annualised loss of 11% over the last half decade. 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. It's always interesting to track share price performance over the longer term. But to understand Tunghsu Azure Renewable EnergyLtd better, we need to consider many other factors. For instance, we've identified 1 warning sign for Tunghsu Azure Renewable EnergyLtd that you should be aware of.

But note: Tunghsu Azure Renewable EnergyLtd 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.

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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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com