Long term investing is the way to go, but that doesn’t mean you should hold every stock forever. We don’t wish catastrophic capital loss on anyone. Anyone who held China Public Procurement Limited (HKG:1094) for five years would be nursing their metaphorical wounds since the share price dropped 99% in that time. We also note that the stock has performed poorly over the last year, with the share price down 77%. Shareholders have had an even rougher run lately, with the share price down 32% in the last 90 days. This could be related to the recent financial results – you can catch up on the most recent data by reading our company report.
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 that China Public Procurement didn’t make a profit in the last twelve months, we’ll focus on revenue growth to form a quick view of its business development. Generally speaking, companies without profits are expected to grow revenue every year, and at a good clip. As you can imagine, fast revenue growth, when maintained, often leads to fast profit growth.
Over half a decade China Public Procurement reduced its trailing twelve month revenue by 52% for each year. That puts it in an unattractive cohort, to put it mildly. So it’s not that strange that the share price dropped 63% per year in that period. We don’t think this is a particularly promising picture. Ironically, that behavior could create an opportunity for the contrarian investor – but only if there are good reasons to predict a brighter future.
It’s probably worth noting we’ve seen significant insider buying in the last quarter, which we consider a positive. On the other hand, we think the revenue and earnings trends are much more meaningful measures of the business. Before buying or selling a stock, we always recommend a close examination of historic growth trends, available here..
A Different Perspective
While the broader market lost about 4.7% in the twelve months, China Public Procurement shareholders did even worse, losing 77%. 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, last year’s performance may indicate unresolved challenges, given that it was worse than the annualised loss of 63% over the last half decade. Generally speaking long term share price weakness can be a bad sign, though contrarian investors might want to research the stock in hope of a turnaround. It is all well and good that insiders have been buying shares, but we suggest you check here to see what price insiders were buying at.
There are plenty of other companies that have insiders buying up shares. You probably do not want to miss this free list of growing companies that insiders are buying.
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 firstname.lastname@example.org. 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.