Long term investing works well, but it doesn’t always work for each individual stock. We don’t wish catastrophic capital loss on anyone. Spare a thought for those who held China Polymetallic Mining Limited (HKG:2133) for five whole years – as the share price tanked 83%. Unhappily, the share price slid 4.3% in the last week.
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.
Because China Polymetallic Mining is loss-making, we think the market is probably more focussed on revenue and revenue growth, at least for now. 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 China Polymetallic Mining saw its revenue shrink by 28% per year. That’s definitely a weaker result than most pre-profit companies report. So it’s not that strange that the share price dropped 30% per year in that period. This kind of price performance makes us very wary, especially when combined with falling revenue. Ironically, that behavior could create an opportunity for the contrarian investor – but only if there are good reasons to predict a brighter future.
The chart below shows how revenue and earnings have changed with time, (if you click on the chart you can see the actual values).
If you are thinking of buying or selling China Polymetallic Mining stock, you should check out this FREE detailed report on its balance sheet.
A Different Perspective
While the broader market lost about 0.6% in the twelve months, China Polymetallic Mining shareholders did even worse, losing 14%. 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, longer term shareholders are suffering worse, given the loss of 30% 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. Shareholders might want to examine this detailed historical graph of past earnings, revenue and cash flow.
If you would prefer to check out another company — one with potentially superior financials — then do not miss this free list of companies that have proven they can 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.
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.
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. Thank you for reading.