The nature of investing is that you win some, and you lose some. And unfortunately for SJM Holdings Limited (HKG:880) shareholders, the stock is a lot lower today than it was a year ago. The share price is down a hefty 67% in that time. Even if you look out three years, the returns are still disappointing, with the share price down66% in that time. Shareholders have had an even rougher run lately, with the share price down 36% in the last 90 days. 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.
After losing 7.4% this past week, it's worth investigating the company's fundamentals to see what we can infer from past performance.
Given that SJM Holdings 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. Some companies are willing to postpone profitability to grow revenue faster, but in that case one does expect good top-line growth.
SJM Holdings grew its revenue by 34% over the last year. That's definitely a respectable growth rate. Unfortunately it seems investors wanted more, because the share price is down 67% in that time. It may well be that the business remains approximately on track, but its revenue growth has simply been delayed. For us it's important to consider when you think a company will become profitable, if you're basing your valuation on revenue.
The graphic below depicts how earnings and revenue have changed over time (unveil the exact values by clicking on the image).
We like that insiders have been buying shares in the last twelve months. Even so, future earnings will be far more important to whether current shareholders make money. You can see what analysts are predicting for SJM Holdings in this interactive graph of future profit estimates.
A Different Perspective
While the broader market lost about 25% in the twelve months, SJM Holdings shareholders did even worse, losing 67%. 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. Regrettably, last year's performance caps off a bad run, with the shareholders facing a total loss of 9% 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. 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. Take risks, for example - SJM Holdings has 2 warning signs (and 1 which is concerning) we think you should know about.
There are plenty of other companies that have insiders buying up shares. You probably do 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. 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.