While not a mind-blowing move, it is good to see that the Guangdong Dowstone Technology Co., Ltd. (SZSE:300409) share price has gained 10% in the last three months. But that doesn't help the fact that the three year return is less impressive. After all, the share price is down 30% in the last three years, significantly under-performing the market.

Since Guangdong Dowstone Technology has shed CN¥396m from its value in the past 7 days, let's see if the longer term decline has been driven by the business' economics.

Given that Guangdong Dowstone Technology only made minimal earnings in the last twelve months, we'll focus on revenue to gauge its business development. As a general rule, we think this kind of company is more comparable to loss-making stocks, since the actual profit is so low. It would be hard to believe in a more profitable future without growing revenues.

Over three years, Guangdong Dowstone Technology grew revenue at 12% per year. That's a pretty good rate of top-line growth. Shareholders have endured a share price decline of 9% per year. This implies the market had higher expectations of Guangdong Dowstone Technology. With revenue growing at a solid clip, now might be the time to focus on the possibility that it will have a brighter future.

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

This free interactive report on Guangdong Dowstone Technology's balance sheet strength is a great place to start, if you want to investigate the stock further.

A Different Perspective

We regret to report that Guangdong Dowstone Technology shareholders are down 20% for the year (even including dividends). Unfortunately, that's worse than the broader market decline of 9.1%. 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 3% 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 4 warning signs for Guangdong Dowstone Technology (2 are significant) that you should be aware of.

But note: Guangdong Dowstone Technology 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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.
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.