The simplest way to benefit from a rising market is to buy an index fund. While individual stocks can be big winners, plenty more fail to generate satisfactory returns. Investors in Beijing Highlander Digital Technology Co., Ltd. (SZSE:300065) have tasted that bitter downside in the last year, as the share price dropped 48%. That’s disappointing when you consider the market declined 10%. At least the damage isn’t so bad if you look at the last three years, since the stock is down 6.6% in that time. The falls have accelerated recently, with the share price down 16% in the last three months.

Since Beijing Highlander Digital Technology has shed CN¥368m from its value in the past 7 days, let’s see if the longer term decline has been driven by the business’ economics.

Check out our latest analysis for Beijing Highlander Digital Technology

Given that Beijing Highlander Digital Technology 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. Some companies are willing to postpone profitability to grow revenue faster, but in that case one would hope for good top-line growth to make up for the lack of earnings.

Beijing Highlander Digital Technology’s revenue didn’t grow at all in the last year. In fact, it fell 13%. That’s not what investors generally want to see. The stock price has languished lately, falling 48% in a year. That seems pretty reasonable given the lack of both profits and revenue growth. We think most holders must believe revenue growth will improve, or else costs will decline.

The graphic below depicts how earnings and revenue have changed over time (unveil the exact values by clicking on the image).

It’s probably worth noting that the CEO is paid less than the median at similar sized companies. It’s always worth keeping an eye on CEO pay, but a more important question is whether the company will grow earnings throughout the years. Dive deeper into the earnings by checking this interactive graph of Beijing Highlander Digital Technology’s earnings, revenue and cash flow.

A Different Perspective

While the broader market lost about 10% in the twelve months, Beijing Highlander Digital Technology shareholders did even worse, losing 48%. 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. Regrettably, last year’s performance caps off a bad run, with the shareholders facing a total loss of 5% per year over five years. 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 Beijing Highlander Digital Technology better, we need to consider many other factors. Case in point: We’ve spotted 1 warning sign for Beijing Highlander Digital Technology you should be aware of.

If you would prefer to check out another company — one with potentially superior financials — then do not miss this free list of companies that have proven they can grow earnings.

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.