Did Changing Sentiment Drive China Green Agriculture's (NYSE:CGA) Share Price Down A Painful 90%?

By
Simply Wall St
Published
April 28, 2020

We're definitely into long term investing, but some companies are simply bad investments over any time frame. It hits us in the gut when we see fellow investors suffer a loss. Imagine if you held China Green Agriculture, Inc. (NYSE:CGA) for half a decade as the share price tanked 90%. And it's not just long term holders hurting, because the stock is down 57% in the last year. Furthermore, it's down 18% in about a quarter. That's not much fun for holders. But this could be related to the weak market, which is down 13% in the same period.

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.

See our latest analysis for China Green Agriculture

Given that China Green Agriculture 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.

In the last half decade, China Green Agriculture saw its revenue increase by 2.4% per year. That's not a very high growth rate considering it doesn't make profits. It's not so sure that share price crash of 37% per year is completely deserved, but the market is doubtless disappointed. While we're definitely wary of the stock, after that kind of performance, it could be an over-reaction. A company like this generally needs to produce profits before it can find favour with new investors.

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

NYSE:CGA Income Statement April 28th 2020

If you are thinking of buying or selling China Green Agriculture stock, you should check out this FREE detailed report on its balance sheet.

A Different Perspective

We regret to report that China Green Agriculture shareholders are down 57% for the year. Unfortunately, that's worse than the broader market decline of 2.1%. However, it could simply be that the share price has been impacted by broader market jitters. It might be worth keeping an eye on the fundamentals, in case there's a good opportunity. Regrettably, last year's performance caps off a bad run, with the shareholders facing a total loss of 37% per year over five years. 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's always interesting to track share price performance over the longer term. But to understand China Green Agriculture better, we need to consider many other factors. For example, we've discovered 4 warning signs for China Green Agriculture (1 can't be ignored!) that you should be aware of before investing here.

If you like to buy stocks alongside management, then you might just love this free list of companies. (Hint: insiders have been buying them).

Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on US exchanges.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. 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.

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. Thank you for reading.

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