The main aim of stock picking is to find the market-beating stocks. But the main game is to find enough winners to more than offset the losers At this point some shareholders may be questioning their investment in Wuxi Huadong Heavy Machinery Co., Ltd. (SZSE:002685), since the last five years saw the share price fall 50%. And we doubt long term believers are the only worried holders, since the stock price has declined 25% over the last twelve months.

The recent uptick of 15% could be a positive sign of things to come, so let's take a look at historical fundamentals.

Wuxi Huadong Heavy Machinery isn't currently profitable, so most analysts would look to revenue growth to get an idea of how fast the underlying business is growing. 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.

In the last five years Wuxi Huadong Heavy Machinery saw its revenue shrink by 43% per year. That's definitely a weaker result than most pre-profit companies report. On the face of it we'd posit the share price fall of 8% compound, over five years is well justified by the fundamental deterioration. This loss means the stock shareholders are probably pretty annoyed. Risk averse investors probably wouldn't like this one much.

You can see below how earnings and revenue have changed over time (discover the exact values by clicking on the image).

If you are thinking of buying or selling Wuxi Huadong Heavy Machinery stock, you should check out this FREE detailed report on its balance sheet.

A Different Perspective

We regret to report that Wuxi Huadong Heavy Machinery shareholders are down 25% for the year. Unfortunately, that's worse than the broader market decline of 15%. 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 8% 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. 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. To that end, you should learn about the 2 warning signs we've spotted with Wuxi Huadong Heavy Machinery (including 1 which can't be ignored) .

If you like to buy stocks alongside management, then you might just love this free list of companies. (Hint: many of them are unnoticed AND have attractive valuation).

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