HG Semiconductor (HKG:6908 investor one-year losses grow to 80% as the stock sheds HK$75m this past week

Even the best investor on earth makes unsuccessful investments. But it would be foolish to simply accept every extremely large loss as an inevitable part of the game. We wouldn't blame HG Semiconductor Limited (HKG:6908) shareholders if they were still in shock after the stock dropped like a lead balloon, down 80% in just one year. That'd be enough to make even the strongest stomachs churn. Longer term investors have fared much better, since the share price is up 31% in three years. The falls have accelerated recently, with the share price down 32% in the last three months. We really hope anyone holding through that price crash has a diversified portfolio. Even when you lose money, you don't have to lose the lesson.

Given the past week has been tough on shareholders, let's investigate the fundamentals and see what we can learn.

See our latest analysis for HG Semiconductor

HG Semiconductor isn't currently profitable, so most analysts would look to revenue growth to get an idea of how fast the underlying business is growing. Shareholders of unprofitable companies usually expect strong revenue growth. As you can imagine, fast revenue growth, when maintained, often leads to fast profit growth.

HG Semiconductor's revenue didn't grow at all in the last year. In fact, it fell 4.5%. That's not what investors generally want to see. The share price fall of 80% in a year tells the story. That's a stern reminder that profitless companies need to grow the top line, at the very least. Of course, extreme share price falls can be an opportunity for those who are willing to really dig deeper to understand a high risk company like this.

The graphic below depicts how earnings and revenue have changed over time (unveil the exact values by clicking on the image).

Take a more thorough look at HG Semiconductor's financial health with this free report on its balance sheet.

A Different Perspective

While the broader market gained around 9.1% in the last year, HG Semiconductor shareholders lost 80%. Even the share prices of good stocks drop sometimes, but we want to see improvements in the fundamental metrics of a business, before getting too interested. Regrettably, last year's performance caps off a bad run, with the shareholders facing a total loss of 2% 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. 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. Like risks, for instance. Every company has them, and we've spotted 5 warning signs for HG Semiconductor (of which 2 are a bit unpleasant!) you should know about.

For those who like to find winning investments this free list of growing companies with recent insider purchasing, could be just the ticket.

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.