Long term investing works well, but it doesn’t always work for each individual stock. It hits us in the gut when we see fellow investors suffer a loss. Imagine if you held Asia-Pac Financial Investment Company Limited (HKG:8193) for half a decade as the share price tanked 97%. And we doubt long term believers are the only worried holders, since the stock price has declined 38% over the last twelve months. Even worse, it’s down 28% in about a month, which isn’t fun at all.
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.
Asia-Pac Financial Investment isn’t currently profitable, so most analysts would look to revenue growth to get an idea of how fast the underlying business is growing. When a company doesn’t make profits, we’d generally expect to see good revenue growth. That’s because it’s hard to be confident a company will be sustainable if revenue growth is negligible, and it never makes a profit.
In the last five years Asia-Pac Financial Investment saw its revenue shrink by 1.9% per year. While far from catastrophic that is not good. The share price fall of 49% (per year, over five years) is a stern reminder that money-losing companies are expected to grow revenue. It takes a certain kind of mental fortitude (or recklessness) to buy shares in a company that loses money and doesn’t grow revenue. That is not really what the successful investors we know aim for.
The graphic below depicts how earnings and revenue have changed over time (unveil the exact values by clicking on the image).
You can see how its balance sheet has strengthened (or weakened) over time in this free interactive graphic.
A Different Perspective
Investors in Asia-Pac Financial Investment had a tough year, with a total loss of 38%, against a market gain of about 10%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. Unfortunately, longer term shareholders are suffering worse, given the loss of 49% doled out over the last five years. We would want clear information suggesting the company will grow, before taking the view that the share price will stabilize. It’s always interesting to track share price performance over the longer term. But to understand Asia-Pac Financial Investment better, we need to consider many other factors. For example, we’ve discovered 5 warning signs for Asia-Pac Financial Investment (1 makes us a bit uncomfortable!) that you should be aware of before investing here.
Of course Asia-Pac Financial Investment may not be the best stock to buy. So you may wish to see this free collection of growth stocks.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on HK exchanges.
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.
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