Sino Oil and Gas Holdings Limited (HKG:702) shareholders will doubtless be very grateful to see the share price up 96% in the last quarter. But the last three years have seen a terrible decline. In that time the share price has melted like a snowball in the desert, down 90%. So it sure is nice to see a big of an improvement. 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.
Sino Oil and Gas Holdings isn’t currently profitable, so most analysts would look to revenue growth to get an idea of how fast the underlying business is growing. Shareholders of unprofitable companies usually expect strong revenue growth. As you can imagine, fast revenue growth, when maintained, often leads to fast profit growth.
Over three years, Sino Oil and Gas Holdings grew revenue at 6.1% per year. That’s not a very high growth rate considering it doesn’t make profits. But the share price crash at 54% per year does seem a bit harsh! While we’re definitely wary of the stock, after that kind of performance, it could be an over-reaction. Of course, revenue growth is nice but generally speaking the lower the profits, the riskier the business – and this business isn’t making steady profits.
The graphic below depicts how earnings and revenue have changed over time (unveil the exact values by clicking on the image).
Balance sheet strength is crucial. It might be well worthwhile taking a look at our free report on how its financial position has changed over time.
A Different Perspective
It’s nice to see that Sino Oil and Gas Holdings shareholders have received a total shareholder return of 46% over the last year. There’s no doubt those recent returns are much better than the TSR loss of 35% per year over five years. This makes us a little wary, but the business might have turned around its fortunes. It’s always interesting to track share price performance over the longer term. But to understand Sino Oil and Gas Holdings better, we need to consider many other factors. Case in point: We’ve spotted 5 warning signs for Sino Oil and Gas Holdings you should be aware of, and 2 of them don’t sit too well with us.
Of course, you might find a fantastic investment by looking elsewhere. So take a peek at this free list of companies we expect will grow earnings.
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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