The simplest way to benefit from a rising market is to buy an index fund. Active investors aim to buy stocks that vastly outperform the market - but in the process, they risk under-performance. Unfortunately the Jiangsu Hongdou Industrial Co.,LTD (SHSE:600400) share price slid 37% over twelve months. That falls noticeably short of the market decline of around 6.1%. Longer term shareholders haven't suffered as badly, since the stock is down a comparatively less painful 7.1% in three years.

With the stock having lost 4.7% in the past week, it's worth taking a look at business performance and seeing if there's any red flags.

See our latest analysis for Jiangsu Hongdou IndustrialLTD

We don't think that Jiangsu Hongdou IndustrialLTD's modest trailing twelve month profit has the market's full attention at the moment. We think revenue is probably a better guide. Generally speaking, we'd consider a stock like this alongside loss-making companies, simply because the quantum of the profit is so low. It would be hard to believe in a more profitable future without growing revenues.

In just one year Jiangsu Hongdou IndustrialLTD saw its revenue fall by 2.2%. That looks pretty grim, at a glance. The stock price has languished lately, falling 37% in a year. That seems pretty reasonable given the lack of both profits and revenue growth. We think most holders must believe revenue growth will improve, or else costs will decline.

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

If you are thinking of buying or selling Jiangsu Hongdou IndustrialLTD stock, you should check out this FREE detailed report on its balance sheet.

A Different Perspective

While the broader market lost about 6.1% in the twelve months, Jiangsu Hongdou IndustrialLTD shareholders did even worse, losing 36% (even including dividends). 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. Regrettably, last year's performance caps off a bad run, with the shareholders facing a total loss of 2% 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. I find it very interesting to look at share price over the long term as a proxy for business performance. But to truly gain insight, we need to consider other information, too. Like risks, for instance. Every company has them, and we've spotted 4 warning signs for Jiangsu Hongdou IndustrialLTD (of which 2 shouldn't be ignored!) you should know about.

Of course Jiangsu Hongdou IndustrialLTD 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.