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It’s not possible to invest over long periods without making some bad investments. But you want to avoid the really big losses like the plague. So take a moment to sympathize with the long term shareholders of E Lighting Group Holdings Limited (HKG:8222), who have seen the share price tank a massive 75% over a three year period. That would be a disturbing experience. And the ride hasn’t got any smoother in recent times over the last year, with the price 58% lower in that time. The falls have accelerated recently, with the share price down 45% in the last three months. This could be related to the recent financial results – you can catch up on the most recent data by reading our company report.
E Lighting Group 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 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 three years E Lighting Group Holdings saw its revenue shrink by 8.2% per year. That is not a good result. Having said that the 37% annualized share price decline highlights the risk of investing in unprofitable companies. This business clearly needs to grow revenues if it is to perform as investors hope. There’s no more than a snowball’s chance in hell that share price will head back to its old highs, in the short term.
This free interactive report on E Lighting Group Holdings’s balance sheet strength is a great place to start, if you want to investigate the stock further.
A Different Perspective
The last twelve months weren’t great for E Lighting Group Holdings shares, which performed worse than the market, costing holders 58%. Meanwhile, the broader market slid about 1.1%, likely weighing on the stock. The three-year loss of 37% per year isn’t as bad as the last twelve months, suggesting that the company has not been able to convince the market it has solved its problems. Although Warren Buffett famously said he likes to ‘buy when there is blood on the streets’, he also focusses on high quality stocks with solid prospects. 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.