As every investor would know, not every swing hits the sweet spot. But really bad investments should be rare. So spare a thought for the long term shareholders of Aoyuan Beauty Valley Technology Co.,Ltd. (SZSE:000615); the share price is down a whopping 75% in the last three years. That would be a disturbing experience. The more recent news is of little comfort, with the share price down 63% in a year. Shareholders have had an even rougher run lately, with the share price down 33% in the last 90 days.

If the past week is anything to go by, investor sentiment for Aoyuan Beauty Valley TechnologyLtd isn’t positive, so let’s see if there’s a mismatch between fundamentals and the share price.

See our latest analysis for Aoyuan Beauty Valley TechnologyLtd

Given that Aoyuan Beauty Valley TechnologyLtd 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. That’s because fast revenue growth can be easily extrapolated to forecast profits, often of considerable size.

Over the last three years, Aoyuan Beauty Valley TechnologyLtd’s revenue dropped 30% per year. That means its revenue trend is very weak compared to other loss making companies. The swift share price decline at an annual compound rate of 21%, reflects this weak fundamental performance. We prefer leave it to clowns to try to catch falling knives, like this stock. There is a good reason that investors often describe buying a sharply falling stock price as ‘trying to catch a falling knife’. Think about it.

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

This free interactive report on Aoyuan Beauty Valley TechnologyLtd’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 Aoyuan Beauty Valley TechnologyLtd shareholders are down 63% for the year. Unfortunately, that’s worse than the broader market decline of 17%. 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 Aoyuan Beauty Valley TechnologyLtd better, we need to consider many other factors. Even so, be aware that Aoyuan Beauty Valley TechnologyLtd is showing 1 warning sign in our investment analysis , you should know about…

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.