In order to justify the effort of selecting individual stocks, it's worth striving to beat the returns from a market index fund. But if you try your hand at stock picking, your risk returning less than the market. Unfortunately, that's been the case for longer term Hebei Huijin Group Co., Ltd. (SZSE:300368) shareholders, since the share price is down 48% in the last three years, falling well short of the market decline of around 15%. The falls have accelerated recently, with the share price down 14% in the last three months. However, one could argue that the price has been influenced by the general market, which is down 6.1% in the same timeframe.
With the stock having lost 9.4% in the past week, it's worth taking a look at business performance and seeing if there's any red flags.
View our latest analysis for Hebei Huijin Group
Given that Hebei Huijin Group 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. Generally speaking, companies without profits are expected to grow revenue every year, and at a good clip. As you can imagine, fast revenue growth, when maintained, often leads to fast profit growth.
Over the last three years, Hebei Huijin Group's revenue dropped 40% per year. That means its revenue trend is very weak compared to other loss making companies. With revenue in decline, the share price decline of 14% per year is hardly undeserved. The key question now is whether the company has the capacity to fund itself to profitability, without more cash. Of course, it is possible for businesses to bounce back from a revenue drop - but we'd want to see that before getting interested.
You can see how earnings and revenue have changed over time in the image below (click on the chart to see the exact values).
This free interactive report on Hebei Huijin Group's balance sheet strength is a great place to start, if you want to investigate the stock further.
A Different Perspective
It's good to see that Hebei Huijin Group has rewarded shareholders with a total shareholder return of 14% in the last twelve months. That's better than the annualised return of 4% over half a decade, implying that the company is doing better recently. Someone with an optimistic perspective could view the recent improvement in TSR as indicating that the business itself is getting better with time. It's always interesting to track share price performance over the longer term. But to understand Hebei Huijin Group better, we need to consider many other factors. Case in point: We've spotted 1 warning sign for Hebei Huijin Group you should be aware of.
If you like to buy stocks alongside management, then you might just love this free list of companies. (Hint: insiders have been buying them).
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.