XJ International Holdings' (HKG:1765) earnings have declined over three years, contributing to shareholders 87% loss

This week we saw the XJ International Holdings Co., Ltd. (HKG:1765) share price climb by 12%. But only the myopic could ignore the astounding decline over three years. The share price has sunk like a leaky ship, down 88% in that time. So it's about time shareholders saw some gains. Only time will tell if the company can sustain the turnaround. We really feel for shareholders in this scenario. It's a good reminder of the importance of diversification, and it's worth keeping in mind there's more to life than money, anyway.

Although the past week has been more reassuring for shareholders, they're still in the red over the last three years, so let's see if the underlying business has been responsible for the decline.

See our latest analysis for XJ International Holdings

Given that XJ International Holdings only made minimal earnings in the last twelve months, we'll focus on revenue to gauge its business development. Generally speaking, we'd consider a stock like this alongside loss-making companies, simply because the quantum of the profit is so low. It would be hard to believe in a more profitable future without growing revenues.

Over three years, XJ International Holdings grew revenue at 22% per year. That's well above most other pre-profit companies. So why has the share priced crashed 23% per year, in the same time? The share price makes us wonder if there is an issue with profitability. Ultimately, revenue growth doesn't amount to much if the business can't scale well. If the company is low on cash, it may have to raise capital soon.

The company's revenue and earnings (over time) are depicted in the image below (click to see the exact numbers).

We consider it positive that insiders have made significant purchases in the last year. Even so, future earnings will be far more important to whether current shareholders make money. This free report showing analyst forecasts should help you form a view on XJ International Holdings

A Different Perspective

XJ International Holdings shareholders are down 58% for the year, but the market itself is up 5.1%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. Regrettably, last year's performance caps off a bad run, with the shareholders facing a total loss of 12% 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. Case in point: We've spotted 3 warning signs for XJ International Holdings you should be aware of, and 1 of them makes us a bit uncomfortable.

If you like to buy stocks alongside management, then you might just love this free list of companies. (Hint: most of them are flying under the radar).

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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com