Introducing Naikun Wind Energy Group (CVE:NKW), The Stock That Slid 65% In The Last Five Years

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We think intelligent long term investing is the way to go. But unfortunately, some companies simply don't succeed. Zooming in on an example, the Naikun Wind Energy Group Inc. (CVE:NKW) share price dropped 65% in the last half decade. We certainly feel for shareholders who bought near the top. We also note that the stock has performed poorly over the last year, with the share price down 33%. Shareholders have had an even rougher run lately, with the share price down 14% in the last 90 days.

View our latest analysis for Naikun Wind Energy Group

With zero revenue generated over twelve months, we don't think that Naikun Wind Energy Group has proved its business plan yet. You have to wonder why venture capitalists aren't funding it. So it seems shareholders are too busy dreaming about the progress to come than dwelling on the current (lack of) revenue. It seems likely some shareholders believe that Naikun Wind Energy Group will significantly advance the business plan before too long.

We think companies that have neither significant revenues nor profits are pretty high risk. There is usually a significant chance that they will need more money for business development, putting them at the mercy of capital markets. So the share price itself impacts the value of the shares (as it determines the cost of capital). While some such companies go on to make revenue, profits, and generate value, others get hyped up by hopeful naifs before eventually going bankrupt. Some Naikun Wind Energy Group investors have already had a taste of the bitterness stocks like this can leave in the mouth.

Naikun Wind Energy Group had liabilities exceeding cash by CA$1,390,933 when it last reported in March 2019, according to our data. That puts it in the highest risk category, according to our analysis. But with the share price diving 19% per year, over 5 years, it's probably fair to say that some shareholders no longer believe the company will succeed. You can see in the image below, how Naikun Wind Energy Group's cash levels have changed over time (click to see the values).

Of course, the truth is that it is hard to value companies without much revenue or profit. Given that situation, would you be concerned if it turned out insiders were relentlessly selling stock? I would feel more nervous about the company if that were so. You can click here to see if there are insiders selling.

A Different Perspective

Investors in Naikun Wind Energy Group had a tough year, with a total loss of 33%, against a market gain of about 1.3%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. Unfortunately, last year's performance may indicate unresolved challenges, given that it was worse than the annualised loss of 19% 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. Shareholders might want to examine this detailed historical graph of past earnings, revenue and cash flow.

Of course, you might find a fantastic investment by looking elsewhere. So take a peek at this free list of companies we expect will grow earnings.

Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on CA 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.