Statistically speaking, long term investing is a profitable endeavour. But unfortunately, some companies simply don't succeed. For example, after five long years the Shenzhen Overseas Chinese Town Co.,Ltd. (SZSE:000069) share price is a whole 73% lower. That's not a lot of fun for true believers. And it's not just long term holders hurting, because the stock is down 54% in the last year. The falls have accelerated recently, with the share price down 17% in the last three months.

On a more encouraging note the company has added CN¥723m to its market cap in just the last 7 days, so let's see if we can determine what's driven the five-year loss for shareholders.

Given that Shenzhen Overseas Chinese TownLtd didn't make a profit in the last twelve months, we'll focus on revenue growth to form a quick view of its business development. Generally speaking, companies without profits are expected to grow revenue every year, and at a good clip. As you can imagine, fast revenue growth, when maintained, often leads to fast profit growth.

In the last half decade, Shenzhen Overseas Chinese TownLtd saw its revenue increase by 6.1% per year. That's a fairly respectable growth rate. So the stock price fall of 12% per year seems pretty steep. The market can be a harsh master when your company is losing money and revenue growth disappoints.

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.

What About The Total Shareholder Return (TSR)?

We've already covered Shenzhen Overseas Chinese TownLtd's share price action, but we should also mention its total shareholder return (TSR). Arguably the TSR is a more complete return calculation because it accounts for the value of dividends (as if they were reinvested), along with the hypothetical value of any discounted capital that have been offered to shareholders. Its history of dividend payouts mean that Shenzhen Overseas Chinese TownLtd's TSR, which was a 70% drop over the last 5 years, was not as bad as the share price return.

A Different Perspective

We regret to report that Shenzhen Overseas Chinese TownLtd shareholders are down 54% for the year. Unfortunately, that's worse than the broader market decline of 17%. 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. Regrettably, last year's performance caps off a bad run, with the shareholders facing a total loss of 11% 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. It's always interesting to track share price performance over the longer term. But to understand Shenzhen Overseas Chinese TownLtd better, we need to consider many other factors. Case in point: We've spotted 1 warning sign for Shenzhen Overseas Chinese TownLtd you should be aware of.

For those who like to find winning investments this free list of undervalued companies with recent insider purchasing, could be just the ticket.

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.

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