Shenzhen Hongtao Group Co.,Ltd. (SZSE:002325) shareholders should be happy to see the share price up 23% in the last month. But that is little comfort to those holding over the last half decade, sitting on a big loss. In fact, the share price has declined rather badly, down some 53% in that time. 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.

While the stock has risen 17% in the past week but long term shareholders are still in the red, let's see what the fundamentals can tell us.

Check out our latest analysis for Shenzhen Hongtao GroupLtd

Given that Shenzhen Hongtao GroupLtd 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. When a company doesn't make profits, we'd generally expect to see good revenue growth. As you can imagine, fast revenue growth, when maintained, often leads to fast profit growth.

Over half a decade Shenzhen Hongtao GroupLtd reduced its trailing twelve month revenue by 17% for each year. That's definitely a weaker result than most pre-profit companies report. Arguably, the market has responded appropriately to this business performance by sending the share price down 9% (annualized) in the same time period. We don't generally like to own companies that lose money and don't grow revenues. You might be better off spending your money on a leisure activity. This looks like a really risky stock to buy, at a glance.

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

This free interactive report on Shenzhen Hongtao GroupLtd's balance sheet strength is a great place to start, if you want to investigate the stock further.

A Different Perspective

We regret to report that Shenzhen Hongtao GroupLtd shareholders are down 24% for the year. Unfortunately, that's worse than the broader market decline of 6.1%. 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. 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 Shenzhen Hongtao GroupLtd better, we need to consider many other factors. For example, we've discovered 3 warning signs for Shenzhen Hongtao GroupLtd (2 are concerning!) that you should be aware of before investing here.

For those who like to find winning investments this free list of growing companies with recent insider purchasing, could be just the ticket.

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.