Shareholders in Aowei Holding (HKG:1370) have lost 68%, as stock drops 12% this past week

Generally speaking long term investing is the way to go. But along the way some stocks are going to perform badly. For example, after five long years the Aowei Holding Limited (HKG:1370) share price is a whole 68% lower. We certainly feel for shareholders who bought near the top. We also note that the stock has performed poorly over the last year, with the share price down 25%. The falls have accelerated recently, with the share price down 16% in the last three months.

After losing 12% this past week, it's worth investigating the company's fundamentals to see what we can infer from past performance.

Check out our latest analysis for Aowei Holding

Because Aowei Holding 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. Generally speaking, companies without profits are expected to grow revenue every year, and at a good clip. 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.

Over five years, Aowei Holding grew its revenue at 4.1% per year. That's far from impressive given all the money it is losing. This lacklustre growth has no doubt fueled the loss of 11% per year, in that time. We'd want to see proof that future revenue growth is likely to be significantly stronger before getting too interested in Aowei Holding. When a stock falls hard like this, some investors like to add the company to a watchlist (in case the business recovers, longer term).

The image below shows how earnings and revenue have tracked over time (if you click on the image you can see greater detail).

We're pleased to report that the CEO is remunerated more modestly than most CEOs at similarly capitalized companies. But while CEO remuneration is always worth checking, the really important question is whether the company can grow earnings going forward. Before buying or selling a stock, we always recommend a close examination of historic growth trends, available here..

A Different Perspective

While the broader market lost about 16% in the twelve months, Aowei Holding shareholders did even worse, losing 25%. 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 11% per year over five years. We realise that Baron Rothschild has said investors should "buy when there is blood on the streets", but we caution that investors should first be sure they are buying a high quality business. It's always interesting to track share price performance over the longer term. But to understand Aowei Holding better, we need to consider many other factors. Even so, be aware that Aowei Holding is showing 1 warning sign in our investment analysis , you should know about...

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 Hong Kong 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.