Even the best stock pickers will make plenty of bad investments. Unfortunately, shareholders of Poly Union Chemical Holding Group Co., Ltd. (SZSE:002037) have suffered share price declines over the last year. To wit the share price is down 55% in that time. At least the damage isn't so bad if you look at the last three years, since the stock is down 11% in that time. The falls have accelerated recently, with the share price down 39% in the last three months. Of course, this share price action may well have been influenced by the 19% decline in the broader market, throughout the period.

With the stock having lost 28% in the past week, it's worth taking a look at business performance and seeing if there's any red flags.

Because Poly Union Chemical Holding Group 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. Shareholders of unprofitable companies usually expect strong 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 year Poly Union Chemical Holding Group saw its revenue grow by 15%. That's definitely a respectable growth rate. Meanwhile, the share price tanked 55%, suggesting the market had much higher expectations. It may well be that the business remains approximately on track, but its revenue growth has simply been delayed. For us it's important to consider when you think a company will become profitable, if you're basing your valuation on revenue.

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

Balance sheet strength is crucial. It might be well worthwhile taking a look at our free report on how its financial position has changed over time.

A Different Perspective

We regret to report that Poly Union Chemical Holding Group shareholders are down 55% for the year. Unfortunately, that's worse than the broader market decline of 26%. 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 7% 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. 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 be aware of the 2 warning signs we've spotted with Poly Union Chemical Holding Group .

Of course Poly Union Chemical Holding Group may not be the best stock to buy. So you may wish to see this free collection of growth stocks.

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.