Some stocks are best avoided. We really hate to see fellow investors lose their hard-earned money. Spare a thought for those who held China E-Information Technology Group Limited (HKG:8055) for five whole years – as the share price tanked 79%. And we doubt long term believers are the only worried holders, since the stock price has declined 63% over the last twelve months. The falls have accelerated recently, with the share price down 28% in the last three months.
Given that China E-Information Technology Group 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. 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.
In the last half decade, China E-Information Technology Group saw its revenue increase by 6.0% per year. That’s a pretty good rate for a long time period. So it is unexpected to see the stock down 27% per year in the last five years. The truth is that the growth might be below expectations, and investors are probably worried about the continual losses.
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.
A Different Perspective
We regret to report that China E-Information Technology Group shareholders are down 63% for the year. Unfortunately, that’s worse than the broader market decline of 0.2%. 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. Regrettably, last year’s performance caps off a bad run, with the shareholders facing a total loss of 27% per year over five years. 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. While it is well worth considering the different impacts that market conditions can have on the share price, there are other factors that are even more important. Be aware that China E-Information Technology Group is showing 4 warning signs in our investment analysis , and 1 of those is significant…
If you are like me, then you will not want to miss this free list of growing companies that insiders are buying.
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 firstname.lastname@example.org. 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.
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