It's not a secret that every investor will make bad investments, from time to time. But it's not unreasonable to try to avoid truly shocking capital losses. So we hope that those who held Kaixin Auto Holdings (NASDAQ:KXIN) during the last year don't lose the lesson, in addition to the 79% hit to the value of their shares. A loss like this is a stark reminder that portfolio diversification is important. Kaixin Auto Holdings hasn't been listed for long, so although we're wary of recent listings that perform poorly, it may still prove itself with time. More recently, the share price has dropped a further 21% in a month.

With that in mind, it's worth seeing if the company's underlying fundamentals have been the driver of long term performance, or if there are some discrepancies.

Check out our latest analysis for Kaixin Auto Holdings

Kaixin Auto Holdings isn't currently profitable, so most analysts would look to revenue growth to get an idea of how fast the underlying business is growing. Shareholders of unprofitable companies usually expect strong revenue growth. Some companies are willing to postpone profitability to grow revenue faster, but in that case one does expect good top-line growth.

Kaixin Auto Holdings' revenue didn't grow at all in the last year. In fact, it fell 67%. That looks like a train-wreck result to investors far and wide. If you need more proof of that, check the share price. (Hint: it tanked 79%). Our mindset doesn't have a lot of time for stocks like this. A healthy aversion to bagholding (holding potentially worthless stocks) sees many shareholders avoid buying shares like this, rightly or wrongly.

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

Given that the market gained 8.6% in the last year, Kaixin Auto Holdings shareholders might be miffed that they lost 79%. While the aim is to do better than that, it's worth recalling that even great long-term investments sometimes underperform for a year or more. With the stock down 18% over the last three months, the market doesn't seem to believe that the company has solved all its problems. Basically, most investors should be wary of buying into a poor-performing stock, unless the business itself has clearly improved. I find it very interesting to look at share price over the long term as a proxy for business performance. But to truly gain insight, we need to consider other information, too. Case in point: We've spotted 4 warning signs for Kaixin Auto Holdings you should be aware of, and 1 of them is concerning.