Investors can approximate the average market return by buying an index fund. Active investors aim to buy stocks that vastly outperform the market - but in the process, they risk under-performance. For example, the TOT BIOPHARM International Company Limited (HKG:1875) share price is down 27% in the last year. That's disappointing when you consider the market declined 17%. TOT BIOPHARM International hasn't been listed for long, so although we're wary of recent listings that perform poorly, it may still prove itself with time. On the other hand the share price has bounced 7.6% over the last week.

Although the past week has been more reassuring for shareholders, they're still in the red over the last year, so let's see if the underlying business has been responsible for the decline.

Check out our latest analysis for TOT BIOPHARM International

Given that TOT BIOPHARM International 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 expect strong revenue growth. As you can imagine, fast revenue growth, when maintained, often leads to fast profit growth.

In the last year TOT BIOPHARM International saw its revenue grow by 239%. That's a strong result which is better than most other loss making companies. Given the revenue growth, the share price drop of 27% seems quite harsh. Our sympathies to shareholders who are now underwater. On the bright side, if this company is moving profits in the right direction, top-line growth like that could be an opportunity. Our monkey brains haven't evolved to think exponentially, so humans do tend to underestimate companies that have exponential growth.

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

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.

A Different Perspective

TOT BIOPHARM International shareholders are down 27% for the year, even worse than the market loss of 17%. That's disappointing, but it's worth keeping in mind that the market-wide selling wouldn't have helped. The share price decline has continued throughout the most recent three months, down 4.0%, suggesting an absence of enthusiasm from investors. Basically, most investors should be wary of buying into a poor-performing stock, unless the business itself has clearly improved. 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. To that end, you should learn about the 2 warning signs we've spotted with TOT BIOPHARM International (including 1 which is potentially serious) .

Of course, you might find a fantastic investment by looking elsewhere. So take a peek at this free list of companies we expect will grow earnings.

Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on HK 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.