Kong Sun Holdings (HKG:295 shareholders incur further losses as stock declines 20% this week, taking five-year losses to 74%

Some stocks are best avoided. It hits us in the gut when we see fellow investors suffer a loss. For example, we sympathize with anyone who was caught holding Kong Sun Holdings Limited (HKG:295) during the five years that saw its share price drop a whopping 74%. Shareholders have had an even rougher run lately, with the share price down 38% in the last 90 days.

Since Kong Sun Holdings has shed HK$135m from its value in the past 7 days, let's see if the longer term decline has been driven by the business' economics.

See our latest analysis for Kong Sun Holdings

Given that Kong Sun Holdings 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. 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 five years Kong Sun Holdings saw its revenue shrink by 25% per year. That's definitely a weaker result than most pre-profit companies report. So it's not altogether surprising to see the share price down 12% per year in the same time period. This kind of price performance makes us very wary, especially when combined with falling revenue. Of course, the poor performance could mean the market has been too severe selling down. That can happen.

The company's revenue and earnings (over time) are depicted in the image below (click to see the exact numbers).

This free interactive report on Kong Sun Holdings' balance sheet strength is a great place to start, if you want to investigate the stock further.

A Different Perspective

Kong Sun Holdings shareholders are down 18% for the year, but the market itself is up 13%. 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. However, the loss over the last year isn't as bad as the 12% per annum loss investors have suffered over the last half decade. We would want clear information suggesting the company will grow, before taking the view that the share price will stabilize. 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. Case in point: We've spotted 3 warning signs for Kong Sun Holdings you should be aware of, and 2 of them are a bit concerning.

If you are like me, then you will 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 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.