Hongbo Co.,Ltd. (SZSE:002229) shareholders should be happy to see the share price up 10% in the last week. But that isn't much consolation for the painful drop we've seen in the last year. Specifically, the stock price nose-dived 71% in that time. It's not uncommon to see a bounce after a drop like that. The real question is whether the company can turn around its fortunes.

While the stock has risen 10% in the past week but long term shareholders are still in the red, let's see what the fundamentals can tell us.

HongboLtd isn't currently profitable, so most analysts would look to revenue growth to get an idea of how fast the underlying business is growing. When a company doesn't make profits, we'd generally hope to see good revenue growth. As you can imagine, fast revenue growth, when maintained, often leads to fast profit growth.

In the last year HongboLtd saw its revenue grow by 11%. While that may seem decent it isn't great considering the company is still making a loss. Nonetheless, it's fair to say the 71% share price implosion is unexpected.. Clearly the market was expecting better, and this may blow out projections of profitability. But if it will make money, albeit later than previously believed, this could be an opportunity.

The company's revenue and earnings (over time) are depicted in the image below (click to see the exact numbers).

Take a more thorough look at HongboLtd's financial health with this free report on its balance sheet.

A Different Perspective

While the broader market lost about 18% in the twelve months, HongboLtd shareholders did even worse, losing 71%. 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. Longer term investors wouldn't be so upset, since they would have made 11%, each year, over five years. If the fundamental data continues to indicate long term sustainable growth, the current sell-off could be an opportunity worth considering. While it is well worth considering the different impacts that market conditions can have on the share price, there are other factors that are even more important. For example, we've discovered 2 warning signs for HongboLtd that you should be aware of before investing here.

We will like HongboLtd better if we see some big insider buys. While we wait, check out this free list of undervalued stocks (mostly small caps) with considerable, recent, insider buying.

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