Some stocks are best avoided. It hits us in the gut when we see fellow investors suffer a loss. Anyone who held China Oceanwide Holdings Limited (HKG:715) for five years would be nursing their metaphorical wounds since the share price dropped 83% in that time. And some of the more recent buyers are probably worried, too, with the stock falling 51% in the last year. Shareholders have had an even rougher run lately, with the share price down 23% 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.
While a drop like that is definitely a body blow, money isn't as important as health and happiness.
China Oceanwide 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. When a company doesn't make profits, we'd generally expect to see good revenue growth. That's because fast revenue growth can be easily extrapolated to forecast profits, often of considerable size.
In the last five years China Oceanwide Holdings saw its revenue shrink by 13% per year. That puts it in an unattractive cohort, to put it mildly. So it's not altogether surprising to see the share price down 13% per year in the same time period. This kind of price performance makes us very wary, especially when combined with falling revenue. Of course, the poor performance could mean the market has been too severe selling down. That can happen.
You can see below how earnings and revenue have changed over time (discover the exact values by clicking on the image).
It's probably worth noting that the CEO is paid less than the median at similar sized companies. It's always worth keeping an eye on CEO pay, but a more important question is whether the company will grow earnings throughout the years. It might be well worthwhile taking a look at our free report on China Oceanwide Holdings' earnings, revenue and cash flow.
A Different Perspective
China Oceanwide Holdings shareholders are down 51% for the year, but the market itself is up 10%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. Unfortunately, last year's performance may indicate unresolved challenges, given that it was worse than the annualised loss of 13% over the last half decade. 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 China Oceanwide Holdings better, we need to consider many other factors. For example, we've discovered 3 warning signs for China Oceanwide Holdings (2 can't be ignored!) that you should be aware of before investing here.
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.
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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. 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.
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