Further weakness as Ri Ying Holdings (HKG:1741) drops 11% this week, taking five-year losses to 61%

Statistically speaking, long term investing is a profitable endeavour. But along the way some stocks are going to perform badly. For example the Ri Ying Holdings Limited (HKG:1741) share price dropped 61% over five years. We certainly feel for shareholders who bought near the top. And it's not just long term holders hurting, because the stock is down 57% in the last year. Furthermore, it's down 41% in about a quarter. That's not much fun for holders.

If the past week is anything to go by, investor sentiment for Ri Ying Holdings isn't positive, so let's see if there's a mismatch between fundamentals and the share price.

See our latest analysis for Ri Ying Holdings

Because Ri Ying Holdings 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.

Over half a decade Ri Ying Holdings reduced its trailing twelve month revenue by 19% for each year. That's definitely a weaker result than most pre-profit companies report. It seems appropriate, then, that the share price slid about 10% annually during that time. It's fair to say most investors don't like to invest in loss making companies with falling revenue. You'd want to research this company pretty thoroughly before buying, it looks a bit too risky for us.

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

We consider it positive that insiders have made significant purchases in the last year. Having said that, most people consider earnings and revenue growth trends to be a more meaningful guide to the business. It might be well worthwhile taking a look at our free report on Ri Ying Holdings' earnings, revenue and cash flow.

A Different Perspective

While the broader market lost about 8.5% in the twelve months, Ri Ying Holdings shareholders did even worse, losing 57%. 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. Unfortunately, last year's performance may indicate unresolved challenges, given that it was worse than the annualised loss of 10% 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. It's always interesting to track share price performance over the longer term. But to understand Ri Ying Holdings better, we need to consider many other factors. Case in point: We've spotted 4 warning signs for Ri Ying Holdings you should be aware of, and 2 of them don't sit too well with us.

Ri Ying Holdings is not the only stock that insiders are buying. For those who like to find winning investments this free list of growing companies with recent insider purchasing, could be just the ticket.

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

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. 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.