Over the last month the New Times Energy Corporation Limited (HKG:166) has been much stronger than before, rebounding by 34%. But will that repair the damage for the weary investors who have owned this stock as it declined over half a decade? Probably not. Like a ship taking on water, the share price has sunk 71% in that time. It's true that the recent bounce could signal the company is turning over a new leaf, but we are not so sure. The real question is whether the business can leave its past behind and improve itself over the years ahead.
Although the past week has been more reassuring for shareholders, they're still in the red over the last five years, so let's see if the underlying business has been responsible for the decline.
Because New Times Energy 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 it's hard to be confident a company will be sustainable if revenue growth is negligible, and it never makes a profit.
In the last half decade, New Times Energy saw its revenue increase by 82% per year. That's better than most loss-making companies. So it's not at all clear to us why the share price sunk 11% throughout that time. You'd have to assume the market is worried that profits won't come soon enough. While there might be an opportunity here, you'd want to take a close look at the balance sheet strength.
The graphic below depicts how earnings and revenue have changed over time (unveil the exact values by clicking on the image).
This free interactive report on New Times Energy's balance sheet strength is a great place to start, if you want to investigate the stock further.
A Different Perspective
Although it hurts that New Times Energy returned a loss of 12% in the last twelve months, the broader market was actually worse, returning a loss of 18%. What is more upsetting is the 11% per annum loss investors have suffered over the last half decade. This sort of share price action isn't particularly encouraging, but at least the losses are slowing. It's always interesting to track share price performance over the longer term. But to understand New Times Energy better, we need to consider many other factors. For instance, we've identified 3 warning signs for New Times Energy (1 is a bit unpleasant) that you should be aware of.
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.
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