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 Delpha Construction Co.,Ltd. (TPE:2530) shareholders for doubting their decision to hold, with the stock down 22% over a half decade. There was little comfort for shareholders in the last week as the price declined a further 1.1%.
Given that Delpha ConstructionLtd 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. When a company doesn't make profits, we'd generally expect to see good revenue growth. Some companies are willing to postpone profitability to grow revenue faster, but in that case one does expect good top-line growth.
Over half a decade Delpha ConstructionLtd reduced its trailing twelve month revenue by 57% for each year. That's definitely a weaker result than most pre-profit companies report. It seems pretty reasonable to us that the share price dipped 4% per year in that time. This loss means the stock shareholders are probably pretty annoyed. It is possible for businesses to bounce back but as Buffett says, 'turnarounds seldom turn'.
You can see below how earnings and revenue have changed over time (discover the exact values by clicking on the image).
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.
What about the Total Shareholder Return (TSR)?
We've already covered Delpha ConstructionLtd's share price action, but we should also mention its total shareholder return (TSR). The TSR attempts to capture the value of dividends (as if they were reinvested) as well as any spin-offs or discounted capital raisings offered to shareholders. Its history of dividend payouts mean that Delpha ConstructionLtd's TSR, which was a 5.6% drop over the last 5 years, was not as bad as the share price return.
A Different Perspective
Delpha ConstructionLtd shareholders are down 17% for the year, but the market itself is up 45%. 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 1.1% 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. Take risks, for example - Delpha ConstructionLtd has 4 warning signs (and 3 which don't sit too well with us) we think you should know about.
We will like Delpha ConstructionLtd better if we see some big insider buys. While we wait, check out this free list of growing companies with considerable, recent, insider buying.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on TW exchanges.
If you decide to trade Delpha ConstructionLtd, use the lowest-cost* platform that is rated #1 Overall by Barron’s, Interactive Brokers. Trade stocks, options, futures, forex, bonds and funds on 135 markets, all from a single integrated account. Promoted
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.
*Interactive Brokers Rated Lowest Cost Broker by StockBrokers.com Annual Online Review 2020
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.