In order to justify the effort of selecting individual stocks, it's worth striving to beat the returns from a market index fund. But even the best stock picker will only win with some selections. So we wouldn't blame long term Shenzhen SDG Information Co., Ltd. (SZSE:000070) shareholders for doubting their decision to hold, with the stock down 40% over a half decade. And it's not just long term holders hurting, because the stock is down 25% in the last year. Even worse, it's down 26% in about a month, which isn't fun at all.

With the stock having lost 6.2% in the past week, it's worth taking a look at business performance and seeing if there's any red flags.

Shenzhen SDG Information isn't currently profitable, so most analysts would look to revenue growth to get an idea of how fast the underlying business is growing. Generally speaking, companies without profits are expected to grow revenue every year, and at a good clip. That's because fast revenue growth can be easily extrapolated to forecast profits, often of considerable size.

In the last five years Shenzhen SDG Information saw its revenue shrink by 4.2% per year. While far from catastrophic that is not good. The share price decline at a rate of 7% per year is disappointing. But it doesn't surprise given the falling revenue. Without profits, its hard to see how shareholders win if the revenue keeps falling.

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 15% in the twelve months, Shenzhen SDG Information shareholders did even worse, losing 25%. 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 7% over the last half decade. 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. It's always interesting to track share price performance over the longer term. But to understand Shenzhen SDG Information better, we need to consider many other factors. Consider for instance, the ever-present spectre of investment risk. We've identified 4 warning signs with Shenzhen SDG Information (at least 3 which are potentially serious) , and understanding them should be part of your investment process.

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.