Statistically speaking, long term investing is a profitable endeavour. But no-one is immune from buying too high. Zooming in on an example, the Financial Street Holdings Co., Ltd. (SZSE:000402) share price dropped 71% in the last half decade. That's an unpleasant experience for long term holders. And some of the more recent buyers are probably worried, too, with the stock falling 50% in the last year. On the other hand the share price has bounced 6.7% over the last week.

On a more encouraging note the company has added CN¥418m to its market cap in just the last 7 days, so let's see if we can determine what's driven the five-year loss for shareholders.

Given that Financial Street Holdings 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. Shareholders of unprofitable companies usually desire strong revenue growth. That's because fast revenue growth can be easily extrapolated to forecast profits, often of considerable size.

Over half a decade Financial Street Holdings reduced its trailing twelve month revenue by 8.8% for each year. That puts it in an unattractive cohort, to put it mildly. So it's not that strange that the share price dropped 11% per year in that period. This kind of price performance makes us very wary, especially when combined with falling revenue. Of course, the poor performance could mean the market has been too severe selling down. That can happen.

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)?

Investors should note that there's a difference between Financial Street Holdings' total shareholder return (TSR) and its share price change, which we've covered above. 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. Its history of dividend payouts mean that Financial Street Holdings' TSR, which was a 68% drop over the last 5 years, was not as bad as the share price return.

A Different Perspective

We regret to report that Financial Street Holdings shareholders are down 50% for the year. Unfortunately, that's worse than the broader market decline of 19%. 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. Unfortunately, last year's performance may indicate unresolved challenges, given that it was worse than the annualised loss of 11% over the last half decade. 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. 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. Consider risks, for instance. Every company has them, and we've spotted 1 warning sign for Financial Street Holdings you should know about.

For those who like to find winning investments this free list of undervalued companies with recent insider purchasing, could be just the ticket.

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.