The main aim of stock picking is to find the market-beating stocks. But every investor is virtually certain to have both over-performing and under-performing stocks. So we wouldn't blame long term Solomon Systech (International) Limited (HKG:2878) shareholders for doubting their decision to hold, with the stock down 46% over a half decade. The silver lining is that the stock is up 2.8% in about a week.
Solomon Systech (International) wasn't profitable in the last twelve months, it is unlikely we'll see a strong correlation between its share price and its earnings per share (EPS). Arguably revenue is our next best option. 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, Solomon Systech (International) grew its revenue at 12% per year. That's a fairly respectable growth rate. Shareholders have seen the share price fall at 8% per year, for five years: a poor performance. Those who bought back then clearly believed in stronger growth - and maybe even profits. There is always a big risk of losing money yourself when you buy shares in a company that loses money.
The company's revenue and earnings (over time) are depicted in the image below (click to see the exact numbers).
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
We're pleased to report that Solomon Systech (International) shareholders have received a total shareholder return of 29% over one year. Notably the five-year annualised TSR loss of 8% per year compares very unfavourably with the recent share price performance. The long term loss makes us cautious, but the short term TSR gain certainly hints at a brighter future. While it is well worth considering the different impacts that market conditions can have on the share price, there are other factors that are even more important. To that end, you should learn about the 2 warning signs we've spotted with Solomon Systech (International) (including 1 which is is a bit unpleasant) .
But note: Solomon Systech (International) may not be the best stock to buy. So take a peek at this free list of interesting companies with past earnings growth (and further growth forecast).
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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