Hangzhou Century Co., Ltd (SZSE:300078) shareholders will doubtless be very grateful to see the share price up 60% in the last quarter. But will that heal all the wounds inflicted over 5 years of declines? Unlikely. Indeed, the share price is down a whopping 72% in that time. The recent bounce might mean the long decline is over, but we are not confident. The important question is if the business itself justifies a higher share price in the long term.

The recent uptick of 14% could be a positive sign of things to come, so let's take a look at historical fundamentals.

Hangzhou Century isn't currently profitable, so most analysts would look to revenue growth to get an idea of how fast the underlying business is growing. Shareholders of unprofitable companies usually desire strong revenue growth. That's because it's hard to be confident a company will be sustainable if revenue growth is negligible, and it never makes a profit.

In the last five years Hangzhou Century saw its revenue shrink by 14% per year. That's definitely a weaker result than most pre-profit companies report. So it's not altogether surprising to see the share price down 11% per year in the same time period. This kind of price performance makes us very wary, especially when combined with falling revenue. Ironically, that behavior could create an opportunity for the contrarian investor - but only if there are good reasons to predict a brighter future.

The graphic below depicts how earnings and revenue have changed over time (unveil the exact values by clicking on the image).

You can see how its balance sheet has strengthened (or weakened) over time in this free interactive graphic.

A Different Perspective

Hangzhou Century shareholders are down 21% 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. However, the loss over the last year isn't as bad as the 11% per annum loss investors have suffered over the last half decade. We would want clear information suggesting the company will grow, before taking the view that the share price will stabilize. It's always interesting to track share price performance over the longer term. But to understand Hangzhou Century better, we need to consider many other factors. Case in point: We've spotted 3 warning signs for Hangzhou Century you should be aware of, and 1 of them is a bit unpleasant.

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.