Focus Media (NASDAQ:FMCN) has a problem.

It's struggling exactly when it seems as though the world's most populous nation is humming along just fine. After posting a charge-riddled loss and a steep drop in year-over-year revenue generation last night, there seems to be more to Focus Media than meets the eye.

Focus Media specializes in out-of-home advertising networks. It powers a fleet of 125,000 LCD monitors that display graphical ads in high-traffic areas, and it runs a network of 262,000 in-elevator poster and digital frames. Focus Media operates 130 outdoor LED billboard displays in Shanghai and Beijing, along with a movie theater commercial platform and Web-based initiatives.

China was quick to bounce back from the global recession, but you wouldn't know it from Focus Media's latest financials. Revenue fell by 26% to $166.6 million, weighed down by a 32% hit in its LCD displays and a whopping 50% haircut on the poster frames.

Focus Media reported a huge loss of $0.99 per share, but there are impairment charges baked into that number. Calling off its deal to sell most of its assets to SINA (NASDAQ:SINA) during the quarter also escalated the depreciation of expenses that were considered discontinued operations earlier in the year. However, even if we strip away the noise, non-GAAP profitability of $7.9 million is 89% lower than last year's production.

In short, Focus Media is a mess.

Advertising has been a surprisingly tough market in China this year. (NASDAQ:SOHU) has been able to pad results with its vibrant online-gaming business. Baidu (NASDAQ:BIDU) is in the sweet spot of paid search. However, out-of-home specialists, including AirMedia Group (NASDAQ:AMCN) in airports and VisionChina Media (NASDAQ:VISN) in mass transportation, are struggling these days.

The silver lining for Focus Media shareholders is that their company's balance sheet is backed by $383.3 million -- or nearly $3 a share -- in cash. However, Focus Media's stock has also tripled off its earlier lows, so the stock gains betray the dimming fundamentals as it leaps higher off its cash mattress.

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Focus Media Group, Baidu and are Motley Fool Rule Breakers picks. SINA is a Motley Fool Stock Advisor selection. Try any of our Foolish newsletter services free for 30 days.

Longtime Fool contributor Rick Munarriz has been to mainland China just once, but he's longing to brush up on Mandarin and pay another visit. He owns no shares in any of the companies mentioned in this story and is also part of the Rule Breakers newsletter research team, seeking out tomorrow's ultimate growth stocks a day early. The Fool has a disclosure policy.