Passive investing in an index fund is a good way to ensure your own returns roughly match the overall market. While individual stocks can be big winners, plenty more fail to generate satisfactory returns. Unfortunately the Jinyuan EP Co., Ltd. (SZSE:000546) share price slid 46% over twelve months. That contrasts poorly with the market decline of 13%. At least the damage isn't so bad if you look at the last three years, since the stock is down 23% in that time. Shareholders have had an even rougher run lately, with the share price down 33% in the last 90 days.

If the past week is anything to go by, investor sentiment for Jinyuan EP isn't positive, so let's see if there's a mismatch between fundamentals and the share price.

Jinyuan EP isn't currently profitable, so most analysts would look to revenue growth to get an idea of how fast the underlying business is growing. When a company doesn't make profits, we'd generally hope to see good revenue growth. That's because fast revenue growth can be easily extrapolated to forecast profits, often of considerable size.

In just one year Jinyuan EP saw its revenue fall by 54%. That looks like a train-wreck result to investors far and wide. Meanwhile, the share price dropped by 46%. We would want to see improvements in the core business, and diminishing losses, before getting too excited about this one.

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

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

A Different Perspective

While the broader market lost about 13% in the twelve months, Jinyuan EP shareholders did even worse, losing 46%. 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. Unfortunately, last year's performance may indicate unresolved challenges, given that it was worse than the annualised loss of 8% over the last half decade. 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. It's always interesting to track share price performance over the longer term. But to understand Jinyuan EP better, we need to consider many other factors. For example, we've discovered 1 warning sign for Jinyuan EP that you should be aware of before investing here.

If you are like me, then you will not want to miss this free list of growing companies 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.