In order to justify the effort of selecting individual stocks, it's worth striving to beat the returns from a market index fund. But in any portfolio, there will be mixed results between individual stocks. At this point some shareholders may be questioning their investment in Elec-Tech International Co., Ltd. (SZSE:002005), since the last five years saw the share price fall 50%. And some of the more recent buyers are probably worried, too, with the stock falling 26% in the last year. Shareholders have had an even rougher run lately, with the share price down 25% in the last 90 days. However, one could argue that the price has been influenced by the general market, which is down 19% in the same timeframe.

If the past week is anything to go by, investor sentiment for Elec-Tech International isn't positive, so let's see if there's a mismatch between fundamentals and the share price.

Elec-Tech International 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. As you can imagine, fast revenue growth, when maintained, often leads to fast profit growth.

In the last five years Elec-Tech International saw its revenue shrink by 27% 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. We doubt many shareholders are delighted with this share price performance. It is possible for businesses to bounce back but as Buffett says, 'turnarounds seldom turn'.

You can see how earnings and revenue have changed over time in the image below (click on the chart to see the exact values).

This free interactive report on Elec-Tech International's balance sheet strength is a great place to start, if you want to investigate the stock further.

A Different Perspective

Elec-Tech International shareholders are down 26% over twelve months, which isn't far from the market return of -26%. Unfortunately, last year's performance is a deterioration of an already poor long term track record, given the loss of 8% 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. I find it very interesting to look at share price over the long term as a proxy for business performance. But to truly gain insight, we need to consider other information, too. Even so, be aware that Elec-Tech International is showing 1 warning sign in our investment analysis , you should know about...

Of course Elec-Tech International 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.