In order to justify the effort of selecting individual stocks, it's worth striving to beat the returns from a market index fund. But the main game is to find enough winners to more than offset the losers At this point some shareholders may be questioning their investment in Qingdao Kingking Applied Chemistry Co., Ltd. (SZSE:002094), since the last five years saw the share price fall 34%. And it's not just long term holders hurting, because the stock is down 33% in the last year. Even worse, it's down 23% in about a month, which isn't fun at all. However, we note the price may have been impacted by the broader market, which is down 13% in the same time period.

With the stock having lost 16% in the past week, it's worth taking a look at business performance and seeing if there's any red flags.

Because Qingdao Kingking Applied Chemistry made a loss in the last twelve months, we think the market is probably more focussed on revenue and revenue growth, at least for now. Shareholders of unprofitable companies usually expect strong revenue growth. That's because fast revenue growth can be easily extrapolated to forecast profits, often of considerable size.

In the last five years Qingdao Kingking Applied Chemistry saw its revenue shrink by 17% per year. That's definitely a weaker result than most pre-profit companies report. 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. We doubt many shareholders are delighted with this share price performance. It is possible for businesses to bounce back but as Buffett says, 'turnarounds seldom turn'.

The image below shows how earnings and revenue have tracked over time (if you click on the image you can see greater detail).

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

While the broader market lost about 25% in the twelve months, Qingdao Kingking Applied Chemistry shareholders did even worse, losing 33%. Having said that, it's inevitable that some stocks will be oversold in a falling market. The key is to keep your eyes on the fundamental developments. Regrettably, last year's performance caps off a bad run, with the shareholders facing a total loss of 6% per year over five years. Generally speaking long term share price weakness can be a bad sign, though contrarian investors might want to research the stock in hope of a turnaround. 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. Case in point: We've spotted 1 warning sign for Qingdao Kingking Applied Chemistry you should be aware of.

Of course Qingdao Kingking Applied Chemistry 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.