Statistically speaking, long term investing is a profitable endeavour. But that doesn't mean long term investors can avoid big losses. For example, after five long years the Liuzhou Iron&Steel Co., Ltd (SHSE:601003) share price is a whole 65% lower. That is extremely sub-optimal, to say the least. We also note that the stock has performed poorly over the last year, with the share price down 31%. Furthermore, it's down 11% in about a quarter. That's not much fun for holders. However, one could argue that the price has been influenced by the general market, which is down 4.5% in the same timeframe.

Since Liuzhou Iron&Steel has shed CN¥487m from its value in the past 7 days, let's see if the longer term decline has been driven by the business' economics.

Because Liuzhou Iron&Steel 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 hope to see good revenue growth. That's because fast revenue growth can be easily extrapolated to forecast profits, often of considerable size.

In the last half decade, Liuzhou Iron&Steel saw its revenue increase by 15% per year. That's a pretty good rate for a long time period. The share price, meanwhile, has fallen 11% compounded, over five years. It seems probably that the business has failed to live up to initial expectations. A pessimistic market can create opportunities.

The image below shows how earnings and revenue have tracked over time (if you click on the image you can see greater detail).

Take a more thorough look at Liuzhou Iron&Steel's financial health with this free report on its balance sheet.

What About Dividends?

As well as measuring the share price return, investors should also consider the total shareholder return (TSR). Whereas the share price return only reflects the change in the share price, the TSR includes the value of dividends (assuming they were reinvested) and the benefit of any discounted capital raising or spin-off. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. We note that for Liuzhou Iron&Steel the TSR over the last 5 years was -54%, which is better than the share price return mentioned above. The dividends paid by the company have thusly boosted the total shareholder return.

A Different Perspective

We regret to report that Liuzhou Iron&Steel shareholders are down 31% for the year (even including dividends). Unfortunately, that's worse than the broader market decline of 15%. 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. Regrettably, last year's performance caps off a bad run, with the shareholders facing a total loss of 9% 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. 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. For instance, we've identified 2 warning signs for Liuzhou Iron&Steel that you should be aware of.

If you would prefer to check out another company -- one with potentially superior financials -- then do not miss this free list of companies that have proven they can grow earnings.

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.