Investing in stocks inevitably means buying into some companies that perform poorly. Long term ELL Environmental Holdings Limited (HKG:1395) shareholders know that all too well, since the share price is down considerably over three years. Unfortunately, they have held through a 68% decline in the share price in that time. Furthermore, it’s down 22% in about a quarter. That’s not much fun for holders. We note that the company has reported results fairly recently; and the market is hardly delighted. You can check out the latest numbers in our company report.
Because ELL Environmental Holdings is loss-making, we think the market is probably more focussed on revenue and revenue growth, at least for now. Generally speaking, companies without profits are expected to grow revenue every year, and at a good clip. Some companies are willing to postpone profitability to grow revenue faster, but in that case one does expect good top-line growth.
Over the last three years, ELL Environmental Holdings’s revenue dropped 16% per year. That means its revenue trend is very weak compared to other loss making companies. Arguably, the market has responded appropriately to this business performance by sending the share price down 31% (annualized) in the same time period. When revenue is dropping, and losses are still costing, and the share price sinking fast, it’s fair to ask if something is remiss. It could be a while before the company repays long suffering shareholders with share price gains.
Take a more thorough look at ELL Environmental Holdings’s financial health with this free report on its balance sheet.
A Different Perspective
ELL Environmental Holdings shareholders are down 14% for the year, falling short of the market return. The market shed around 9.2%, no doubt weighing on the stock price. However, the loss over the last year isn’t as bad as the 31% per annum loss investors have suffered over the last three years. We would want clear information suggesting the company will grow, before taking the view that the share price will stabilize. You might want to assess this data-rich visualization of its earnings, revenue and cash flow.
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.
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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. Thank you for reading.