Pegasus International Holdings'(HKG:676) Share Price Is Down 31% Over The Past Three Years.

As an investor its worth striving to ensure your overall portfolio beats the market average. But if you try your hand at stock picking, your risk returning less than the market. Unfortunately, that's been the case for longer term Pegasus International Holdings Limited (HKG:676) shareholders, since the share price is down 31% in the last three years, falling well short of the market decline of around 2.4%. It's down 4.0% in the last seven days.

Check out our latest analysis for Pegasus International Holdings

Pegasus International Holdings recorded just US$3,082,000 in revenue over the last twelve months, which isn't really enough for us to consider it to have a proven product. We can't help wondering why it's publicly listed so early in its journey. Are venture capitalists not interested? So it seems that the investors focused more on what could be, than paying attention to the current revenues (or lack thereof). Investors will be hoping that Pegasus International Holdings can make progress and gain better traction for the business, before it runs low on cash.

We think companies that have neither significant revenues nor profits are pretty high risk. There is almost always a chance they will need to raise more capital, and their progress - and share price - will dictate how dilutive that is to current holders. While some such companies go on to make revenue, profits, and generate value, others get hyped up by hopeful naifs before eventually going bankrupt.

When it reported in June 2020 Pegasus International Holdings had minimal cash in excess of all liabilities consider its expenditure: just US$1.9m to be specific. So if it hasn't remedied the situation already, it will almost certainly have to raise more capital soon. With that in mind, you can understand why the share price dropped 10% per year, over 3 years. The image below shows how Pegasus International Holdings' balance sheet has changed over time; if you want to see the precise values, simply click on the image.

In reality it's hard to have much certainty when valuing a business that has neither revenue or profit. What if insiders are ditching the stock hand over fist? It would bother me, that's for sure. You can click here to see if there are insiders selling.

A Different Perspective

Pegasus International Holdings shareholders are down 19% for the year, but the broader market is up 6.8%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. Shareholders have lost 9% per year over the last three years, so the share price drop has become steeper, over the last year; a potential symptom of as yet unsolved challenges. We would be wary of buying into a company with unsolved problems, although some investors will buy into struggling stocks if they believe the price is sufficiently attractive. While it is well worth considering the different impacts that market conditions can have on the share price, there are other factors that are even more important. To that end, you should learn about the 3 warning signs we've spotted with Pegasus International Holdings (including 1 which is can't be ignored) .

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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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.
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