It’s easy to match the overall market return by buying an index fund. But if you buy individual stocks, you can do both better or worse than that. That downside risk was realized by China E-Information Technology Group Limited (HKG:8055) shareholders over the last year, as the share price declined 40%. That’s well bellow the market return of -1.6%. Longer term shareholders haven’t suffered as badly, since the stock is down a comparatively less painful 2.0% in three years. Furthermore, it’s down 20% in about a quarter. That’s not much fun for holders. This could be related to the recent financial results – you can catch up on the most recent data by reading our company report.
Given that China E-Information Technology Group didn’t make a profit in the last twelve months, we’ll focus on revenue growth to form a quick view of its business development. When a company doesn’t make profits, we’d generally expect to see good revenue growth. As you can imagine, fast revenue growth, when maintained, often leads to fast profit growth.
In the last year China E-Information Technology Group saw its revenue grow by 9.7%. That’s not a very high growth rate considering it doesn’t make profits. Given this lacklustre revenue growth, the share price drop of 40% seems pretty appropriate. It’s important not to lose sight of the fact that profitless companies must grow. But if you buy a loss making company then you could become a loss making investor.
Depicted in the graphic below, you’ll see revenue and earnings over time. If you want more detail, you can click on the chart itself.
Take a more thorough look at China E-Information Technology Group’s financial health with this free report on its balance sheet.
A Different Perspective
We regret to report that China E-Information Technology Group shareholders are down 40% for the year. Unfortunately, that’s worse than the broader market decline of 1.6%. 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. Longer term investors wouldn’t be so upset, since they would have made 1.2%, each year, over five years. If the fundamental data continues to indicate long term sustainable growth, the current sell-off could be an opportunity worth considering. You might want to assess this data-rich visualization of its earnings, revenue and cash flow.
But note: China E-Information Technology Group may not be the best stock to buy. So take a peek at this free list of interesting companies with past earnings growth (and further growth forecast).Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on HK 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 email@example.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.