If you love investing in stocks you're bound to buy some losers. Long term Shandong Chenming Paper Holdings Limited (SZSE:000488) shareholders know that all too well, since the share price is down considerably over three years. Sadly for them, the share price is down 60% in that time. And the ride hasn't got any smoother in recent times over the last year, with the price 28% lower in that time.

On a more encouraging note the company has added CN¥460m to its market cap in just the last 7 days, so let's see if we can determine what's driven the three-year loss for shareholders.

Shandong Chenming Paper Holdings isn't currently profitable, so most analysts would look to revenue growth to get an idea of how fast the underlying business is growing. When a company doesn't make profits, we'd generally hope to see good revenue growth. Some companies are willing to postpone profitability to grow revenue faster, but in that case one would hope for good top-line growth to make up for the lack of earnings.

Over the last three years, Shandong Chenming Paper Holdings' revenue dropped 9.6% per year. That's not what investors generally want to see. With revenue in decline, and profit but a dream, we can understand why the share price has been declining at 17% per year. Having said that, if growth is coming in the future, now may be the low ebb for the company. We'd be pretty wary of this one until it makes a profit, because we don't specialize in finding turnaround situations.

The graphic below depicts how earnings and revenue have changed over time (unveil the exact values by clicking on the image).

This free interactive report on Shandong Chenming Paper Holdings' balance sheet strength is a great place to start, if you want to investigate the stock further.

A Different Perspective

We regret to report that Shandong Chenming Paper Holdings shareholders are down 28% for the year. Unfortunately, that's worse than the broader market decline of 17%. 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 5% 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. 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. Case in point: We've spotted 1 warning sign for Shandong Chenming Paper Holdings you should be aware of.

If you are like me, then you will not want to miss this free list of undervalued small caps that insiders are 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.

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