Some stocks are best avoided. We really hate to see fellow investors lose their hard-earned money. Anyone who held Computime Group Limited (HKG:320) for five years would be nursing their metaphorical wounds since the share price dropped 86% in that time. And it’s not just long term holders hurting, because the stock is down 65% in the last year. The falls have accelerated recently, with the share price down 44% in the last three months.
We really feel for shareholders in this scenario. It’s a good reminder of the importance of diversification, and it’s worth keeping in mind there’s more to life than money, anyway.
View our latest analysis for Computime Group
Given that Computime Group only made minimal earnings in the last twelve months, we’ll focus on revenue to gauge its business development. Generally speaking, we’d consider a stock like this alongside loss-making companies, simply because the quantum of the profit is so low. For shareholders to have confidence a company will grow profits significantly, it must grow revenue.
In the last half decade, Computime Group saw its revenue increase by 2.5% per year. That’s far from impressive given all the money it is losing. Nonetheless, it’s fair to say the rapidly declining share price (down 32%, compound, over five years) suggests the market is very disappointed with this level of growth. While we’re definitely wary of the stock, after that kind of performance, it could be an over-reaction. We’d recommend focussing any further research on the likelihood of profitability in the foreseeable future, given the muted revenue growth.
The company’s revenue and earnings (over time) are depicted in the image below (click to see the exact numbers).
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.
What About Dividends?
When looking at investment returns, it is important to consider the difference between total shareholder return (TSR) and share price return. The TSR incorporates the value of any spin-offs or discounted capital raisings, along with any dividends, based on the assumption that the dividends are reinvested. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. In the case of Computime Group, it has a TSR of -82% for the last 5 years. That exceeds its share price return that we previously mentioned. This is largely a result of its dividend payments!
A Different Perspective
We regret to report that Computime Group shareholders are down 64% for the year (even including dividends) . Unfortunately, that’s worse than the broader market decline of 19%. 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 29% 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. 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. Even so, be aware that Computime Group is showing 5 warning signs in our investment analysis , and 1 of those is significant…
If you like to buy stocks alongside management, then you might just love this free list of companies. (Hint: insiders have been buying them).
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on HK exchanges.
If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned.
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Thank you for reading.