It is doubtless a positive to see that the H&R Century Union Corporation (SZSE:000892) share price has gained some 43% in the last three months. But if you look at the last five years the returns have not been good. You would have done a lot better buying an index fund, since the stock has dropped 32% in that half decade.

On a more encouraging note the company has added CN¥515m 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 H&R Century Union 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. Some companies are willing to postpone profitability to grow revenue faster, but in that case one would hope for good top-line growth to make up for the lack of earnings.

Over half a decade H&R Century Union reduced its trailing twelve month revenue by 12% for each year. That puts it in an unattractive cohort, to put it mildly. On the face of it we'd posit the share price fall of 6% compound, over five years is well justified by the fundamental deterioration. This loss means the stock shareholders are probably pretty annoyed. Risk averse investors probably wouldn't like this one much.

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

This free interactive report on H&R Century Union's balance sheet strength is a great place to start, if you want to investigate the stock further.

A Different Perspective

H&R Century Union shareholders are down 15% for the year, but the market itself is up 4.9%. Even the share prices of good stocks drop sometimes, but we want to see improvements in the fundamental metrics of a business, before getting too interested. Regrettably, last year's performance caps off a bad run, with the shareholders facing a total loss of 6% 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. You might want to assess this data-rich visualization of its earnings, revenue and cash flow.

If you are like me, then you will not want to miss this free list of undervalued small caps that insiders are 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.