It is doubtless a positive to see that the Xinlun New Materials Co., Ltd. (SZSE:002341) share price has gained some 39% in the last three months. But that can't change the reality that over the longer term (five years), the returns have been really quite dismal. In that time the share price has delivered a rude shock to holders, who find themselves down 57% after a long stretch. Some might say the recent bounce is to be expected after such a bad drop. We'd err towards caution given the long term under-performance.

The recent uptick of 11% could be a positive sign of things to come, so let's take a lot at historical fundamentals.

Check out our latest analysis for Xinlun New Materials

Xinlun New Materials wasn't profitable in the last twelve months, it is unlikely we'll see a strong correlation between its share price and its earnings per share (EPS). Arguably revenue is our next best option. When a company doesn't make profits, we'd generally expect to see good 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 Xinlun New Materials saw its revenue shrink by 2.4% per year. That's not what investors generally want to see. With neither profit nor revenue growth, the loss of 9% per year doesn't really surprise us. The chance of imminent investor enthusiasm for this stock seems slimmer than Louise Brooks. Not that many investors like to invest in companies that are losing money and not growing revenue.

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

If you are thinking of buying or selling Xinlun New Materials stock, you should check out this FREE detailed report on its balance sheet.

A Different Perspective

We regret to report that Xinlun New Materials shareholders are down 25% for the year. Unfortunately, that's worse than the broader market decline of 10%. 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 9% 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 Xinlun New Materials better, we need to consider many other factors. Take risks, for example - Xinlun New Materials has 2 warning signs (and 1 which is potentially serious) we think you should know about.

Of course Xinlun New Materials 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 CN 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.