In order to justify the effort of selecting individual stocks, it's worth striving to beat the returns from a market index fund. But the risk of stock picking is that you will likely buy under-performing companies. We regret to report that long term Xinglong Holding (Group) Company Ltd. (SZSE:000955) shareholders have had that experience, with the share price dropping 40% in three years, versus a market decline of about 29%. And the ride hasn't got any smoother in recent times over the last year, with the price 29% lower in that time. The falls have accelerated recently, with the share price down 32% 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.

After losing 29% this past week, it's worth investigating the company's fundamentals to see what we can infer from past performance.

Because Xinglong 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. 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 Xinglong Holding (Group) saw its revenue shrink by 21% 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 12% 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 graphic below depicts how earnings and revenue have changed over time (unveil 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 Xinglong Holding (Group) shareholders are down 29% for the year. Unfortunately, that's worse than the broader market decline of 26%. However, it could simply be that the share price has been impacted by broader market jitters. It might be worth keeping an eye on the fundamentals, in case there's a good opportunity. Unfortunately, last year's performance may indicate unresolved challenges, given that it was worse than the annualised loss of 1.6% over the last half decade. 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. 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. Take risks, for example - Xinglong Holding (Group) has 2 warning signs (and 1 which is a bit concerning) we think you should know about.

But note: Xinglong Holding (Group) may not be the best stock to buy. So take a peek at this free list of interesting companies with past earnings growth (and further growth forecast).

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.