We’re definitely into long term investing, but some companies are simply bad investments over any time frame. We really hate to see fellow investors lose their hard-earned money. For example, we sympathize with anyone who was caught holding KuangChi Science Limited (HKG:439) during the five years that saw its share price drop a whopping 93%. And it’s not just long term holders hurting, because the stock is down 36% in the last year. Furthermore, it’s down 22% in about a quarter. That’s not much fun for holders.
We really hope anyone holding through that price crash has a diversified portfolio. Even when you lose money, you don’t have to lose the lesson.
Check out our latest analysis for KuangChi Science
KuangChi Science isn’t currently profitable, so most analysts would look to revenue growth to get an idea of how fast the underlying business is growing. When a company doesn’t make profits, we’d generally expect to see good revenue growth. Some companies are willing to postpone profitability to grow revenue faster, but in that case one does expect good top-line growth.
In the last half decade, KuangChi Science saw its revenue increase by 2.9% per year. That’s far from impressive given all the money it is losing. It’s not so sure that share price crash of 42% per year is completely deserved, but the market is doubtless disappointed. 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).
If you are thinking of buying or selling KuangChi Science stock, you should check out this FREE detailed report on its balance sheet.
A Different Perspective
While the broader market gained around 4.9% in the last year, KuangChi Science shareholders lost 36%. Even the share prices of good stocks drop sometimes, but we want to see improvements in the fundamental metrics of a business, before getting too interested. However, the loss over the last year isn’t as bad as the 42% per annum loss investors have suffered over the last half decade. We’d need to see some sustained improvements in the key metrics before we could muster much enthusiasm. You could get a better understanding of KuangChi Science’s growth by checking out this more detailed historical graph of earnings, revenue and cash flow.
Of course KuangChi Science may not be the best stock to buy. So you may wish to see this free collection of growth stocks.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on HK exchanges.
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.
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. Thank you for reading.