As an investor its worth striving to ensure your overall portfolio beats the market average. But the risk of stock picking is that you will likely buy under-performing companies. We regret to report that long term Zhejiang Wazam New Materials Co.,LTD. (SHSE:603186) shareholders have had that experience, with the share price dropping 35% in three years, versus a market decline of about 27%. The more recent news is of little comfort, with the share price down 31% in a year. Even worse, it's down 14% in about a month, which isn't fun at all. However, we note the price may have been impacted by the broader market, which is down 6.9% in the same time period.

After losing 11% this past week, it's worth investigating the company's fundamentals to see what we can infer from past performance.

Zhejiang Wazam New MaterialsLTD isn't currently profitable, so most analysts would look to revenue growth to get an idea of how fast the underlying business is growing. Generally speaking, companies without profits are expected to grow revenue every year, and at a good clip. As you can imagine, fast revenue growth, when maintained, often leads to fast profit growth.

Over three years, Zhejiang Wazam New MaterialsLTD grew revenue at 2.8% per year. That's not a very high growth rate considering it doesn't make profits. The stock dropped 10% during that time. Shareholders will probably be hoping growth picks up soon. But the real upside for shareholders will be if the company can start generating profits.

You can see how earnings and revenue have changed over time in the image below (click on the chart to see the exact values).

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.

What About The Total Shareholder Return (TSR)?

We'd be remiss not to mention the difference between Zhejiang Wazam New MaterialsLTD's total shareholder return (TSR) and its share price return. The TSR attempts to capture the value of dividends (as if they were reinvested) as well as any spin-offs or discounted capital raisings offered to shareholders. Zhejiang Wazam New MaterialsLTD's TSR of was a loss of 33% for the 3 years. That wasn't as bad as its share price return, because it has paid dividends.

A Different Perspective

While the broader market lost about 16% in the twelve months, Zhejiang Wazam New MaterialsLTD shareholders did even worse, losing 31%. Having said that, it's inevitable that some stocks will be oversold in a falling market. The key is to keep your eyes on the fundamental developments. 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 example, we've discovered 2 warning signs for Zhejiang Wazam New MaterialsLTD (1 is potentially serious!) that you should be aware of before investing here.

But note: Zhejiang Wazam New MaterialsLTD 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.

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