Statistically speaking, long term investing is a profitable endeavour. But along the way some stocks are going to perform badly. For example the Better Life Commercial Chain Share Co.,Ltd (SZSE:002251) share price dropped 67% over five years. That is extremely sub-optimal, to say the least. And we doubt long term believers are the only worried holders, since the stock price has declined 45% over the last twelve months. The falls have accelerated recently, with the share price down 17% in the last three months.

Since Better Life Commercial Chain ShareLtd has shed CN¥398m from its value in the past 7 days, let's see if the longer term decline has been driven by the business' economics.

Because Better Life Commercial Chain ShareLtd 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 it's hard to be confident a company will be sustainable if revenue growth is negligible, and it never makes a profit.

In the last five years Better Life Commercial Chain ShareLtd saw its revenue shrink by 21% per year. That's definitely a weaker result than most pre-profit companies report. Arguably, the market has responded appropriately to this business performance by sending the share price down 11% (annualized) in the same time period. We don't generally like to own companies that lose money and don't grow revenues. You might be better off spending your money on a leisure activity. This looks like a really risky stock to buy, at a glance.

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 Better Life Commercial Chain ShareLtd's financial health with this free report on its balance sheet.

A Different Perspective

While the broader market lost about 15% in the twelve months, Better Life Commercial Chain ShareLtd shareholders did even worse, losing 45%. 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 11% 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. For instance, we've identified 2 warning signs for Better Life Commercial Chain ShareLtd 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.