In order to justify the effort of selecting individual stocks, it's worth striving to beat the returns from a market index fund. But the main game is to find enough winners to more than offset the losers At this point some shareholders may be questioning their investment in Tsinghua Tongfang Co., Ltd. (SHSE:600100), since the last five years saw the share price fall 41%. And we doubt long term believers are the only worried holders, since the stock price has declined 32% over the last twelve months. Furthermore, it's down 17% in about a quarter. That's not much fun for holders. Of course, this share price action may well have been influenced by the 13% decline in the broader market, throughout the period.

If the past week is anything to go by, investor sentiment for Tsinghua Tongfang isn't positive, so let's see if there's a mismatch between fundamentals and the share price.

Given that Tsinghua Tongfang didn't make a profit in the last twelve months, we'll focus on revenue growth to form a quick view of its business development. When a company doesn't make profits, we'd generally hope to see good revenue growth. That's because fast revenue growth can be easily extrapolated to forecast profits, often of considerable size.

Over five years, Tsinghua Tongfang grew its revenue at 3.5% per year. That's not a very high growth rate considering it doesn't make profits. Given this fairly low revenue growth (and lack of profits), it's not particularly surprising to see the stock down 7% (annualized) in the same time frame. Investors should consider how bad the losses are, and whether the company can make it to profitability with ease. It could be worth putting it on your watchlist and revisiting when it makes its maiden profit.

You can see below how earnings and revenue have changed over time (discover the exact values by clicking on the image).

Take a more thorough look at Tsinghua Tongfang'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, Tsinghua Tongfang shareholders did even worse, losing 32%. 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 7% per year over five years. Generally speaking long term share price weakness can be a bad sign, though contrarian investors might want to research the stock in hope of a turnaround. It's always interesting to track share price performance over the longer term. But to understand Tsinghua Tongfang better, we need to consider many other factors. For instance, we've identified 1 warning sign for Tsinghua Tongfang that you should be aware of.

Of course Tsinghua Tongfang may not be the best stock to buy. So you may wish to see this free collection of growth stocks.

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.