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If you love investing in stocks you’re bound to buy some losers. But the last three years have been particularly tough on longer term China Information Technology Development Limited (HKG:8178) shareholders. Regrettably, they have had to cope with a 53% drop in the share price over that period. And more recent buyers are having a tough time too, with a drop of 24% in the last year. It’s down 1.1% in the last seven days.
Because China Information Technology Development is loss-making, we think the market is probably more focussed on revenue and revenue growth, at least for now. Shareholders of unprofitable companies usually expect strong revenue growth. That’s because fast revenue growth can be easily extrapolated to forecast profits, often of considerable size.
In the last three years, China Information Technology Development saw its revenue grow by 38% per year, compound. That is faster than most pre-profit companies. The share price has moved in quite the opposite direction, down 22% over that time, a bad result. This could mean hype has come out of the stock because the losses are concerning investors. But a share price drop of that magnitude could well signal that the market is overly negative on the stock.
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
While the broader market lost about 1.1% in the twelve months, China Information Technology Development shareholders did even worse, losing 24%. 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. Regrettably, last year’s performance caps off a bad run, with the shareholders facing a total loss of 6.7% per year over five years. We realise that Buffett 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 businesses. You might want to assess this data-rich visualization of its earnings, revenue and cash flow.
Of course, you might find a fantastic investment by looking elsewhere. So take a peek at this free list of companies we expect will 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 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.