The main aim of stock picking is to find the market-beating stocks. But in any portfolio, there will be mixed results between individual stocks. At this point some shareholders may be questioning their investment in Shanghai Jiao Yun Group Co., Ltd. (SHSE:600676), since the last five years saw the share price fall 44%. And we doubt long term believers are the only worried holders, since the stock price has declined 35% over the last twelve months. Shareholders have had an even rougher run lately, with the share price down 21% in the last 90 days.

Since Shanghai Jiao Yun Group has shed CN¥432m from its value in the past 7 days, let's see if the longer term decline has been driven by the business' economics.

Because Shanghai Jiao Yun 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. Generally speaking, companies without profits are expected to grow revenue every year, and at a good clip. 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 Shanghai Jiao Yun Group saw its revenue shrink by 12% per year. That's definitely a weaker result than most pre-profit companies report. It seems pretty reasonable to us that the share price dipped 8% per year in that time. 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'.

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

If you are thinking of buying or selling Shanghai Jiao Yun Group stock, you should check out this FREE detailed report on its balance sheet.

A Different Perspective

We regret to report that Shanghai Jiao Yun Group shareholders are down 35% for the year. Unfortunately, that's worse than the broader market decline of 10%. 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 7% 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. It's always interesting to track share price performance over the longer term. But to understand Shanghai Jiao Yun Group better, we need to consider many other factors. Consider for instance, the ever-present spectre of investment risk. We've identified 1 warning sign with Shanghai Jiao Yun Group , and understanding them should be part of your investment process.

If you like to buy stocks alongside management, then you might just love this free list of companies. (Hint: many of them are unnoticed AND have attractive valuation).

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.