Some Crocodile Garments (HKG:122) Shareholders Have Taken A Painful 72% Share Price Drop

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. Imagine if you held Crocodile Garments Limited (HKG:122) for half a decade as the share price tanked 72%. And it's not just long term holders hurting, because the stock is down 49% in the last year. The falls have accelerated recently, with the share price down 12% in the last three months.

Check out our latest analysis for Crocodile Garments

Because Crocodile Garments made a loss in the last twelve months, we think the market is probably more focussed on revenue and revenue growth, at least for now. Shareholders of unprofitable companies usually expect strong revenue growth. That's because fast revenue growth can be easily extrapolated to forecast profits, often of considerable size.

In the last five years Crocodile Garments saw its revenue shrink by 14% per year. That puts it in an unattractive cohort, to put it mildly. So it's not that strange that the share price dropped 22% per year in that period. This kind of price performance makes us very wary, especially when combined with falling revenue. Of course, the poor performance could mean the market has been too severe selling down. That can happen.

You can see below how earnings and revenue have changed over time (discover the exact values by clicking on the image).

Take a more thorough look at Crocodile Garments's financial health with this free report on its balance sheet.

A Different Perspective

While the broader market lost about 1.0% in the twelve months, Crocodile Garments shareholders did even worse, losing 49%. 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 22% 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. 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. For example, we've discovered 3 warning signs for Crocodile Garments (1 is potentially serious!) that you should be aware of before investing here.

But note: Crocodile Garments may not be the best stock to buy. So take a peek at this free list of interesting companies with past earnings growth (and further growth forecast).

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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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. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned. Thank you for reading.