As an investor its worth striving to ensure your overall portfolio beats the market average. But the risk of stock picking is that you will likely buy under-performing companies. We regret to report that long term Xining Special Steel.Co.,Ltd (SHSE:600117) shareholders have had that experience, with the share price dropping 28% in three years, versus a market decline of about 13%.
Since shareholders are down over the longer term, lets look at the underlying fundamentals over the that time and see if they've been consistent with returns.
Check out our latest analysis for Xining Special Steel.Co.Ltd
Xining Special Steel.Co.Ltd 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 expect to see good revenue growth. Some companies are willing to postpone profitability to grow revenue faster, but in that case one does expect good top-line growth.
In the last three years Xining Special Steel.Co.Ltd saw its revenue shrink by 23% per year. That means its revenue trend is very weak compared to other loss making companies. With revenue in decline, the share price decline of 9% per year is hardly undeserved. The key question now is whether the company has the capacity to fund itself to profitability, without more cash. Of course, it is possible for businesses to bounce back from a revenue drop - but we'd want to see that before getting interested.
The image below shows how earnings and revenue have tracked over time (if you click on the image you can see greater detail).
It's probably worth noting that the CEO is paid less than the median at similar sized companies. But while CEO remuneration is always worth checking, the really important question is whether the company can grow earnings going forward. Dive deeper into the earnings by checking this interactive graph of Xining Special Steel.Co.Ltd's earnings, revenue and cash flow.
A Different Perspective
Xining Special Steel.Co.Ltd shareholders are down 6.4% over twelve months, which isn't far from the market return of -6.8%. Unfortunately, last year's performance is a deterioration of an already poor long term track record, given the loss of 3% per year over the last five years. It will probably take a substantial improvement in the fundamental performance for the company to reverse this trend. It's always interesting to track share price performance over the longer term. But to understand Xining Special Steel.Co.Ltd better, we need to consider many other factors. For example, we've discovered 2 warning signs for Xining Special Steel.Co.Ltd that you should be aware of before investing here.
If you are like me, then you will not want to miss this free list of growing companies 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.
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.