Some stocks are best avoided. We really hate to see fellow investors lose their hard-earned money. For example, we sympathize with anyone who was caught holding China E-Information Technology Group Limited (HKG:8055) during the five years that saw its share price drop a whopping 97%. And we doubt long term believers are the only worried holders, since the stock price has declined 89% over the last twelve months. The falls have accelerated recently, with the share price down 77% in the last three months. We note that the company has reported results fairly recently; and the market is hardly delighted. You can check out the latest numbers in our company report.
We really hope anyone holding through that price crash has a diversified portfolio. Even when you lose money, you don't have to lose the lesson.
Because China E-Information Technology Group 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.
In the last half decade, China E-Information Technology Group saw its revenue increase by 6.9% per year. That's a pretty good rate for a long time period. So it is unexpected to see the stock down 49% per year in the last five years. The truth is that the growth might be below expectations, and investors are probably worried about the continual losses.
The image below shows how earnings and revenue have tracked over time (if you click on the image you can see greater detail).
This free interactive report on China E-Information Technology Group's balance sheet strength is a great place to start, if you want to investigate the stock further.
A Different Perspective
We regret to report that China E-Information Technology Group shareholders are down 89% for the year. Unfortunately, that's worse than the broader market decline of 2.6%. 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. Unfortunately, last year's performance may indicate unresolved challenges, given that it was worse than the annualised loss of 49% 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. 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. For example, we've discovered 5 warning signs for China E-Information Technology Group (3 are a bit unpleasant!) that you should be aware of before investing here.
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 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. Thank you for reading.