The main aim of stock picking is to find the market-beating stocks. But even the best stock picker will only win with some selections. So we wouldn't blame long term Gem-Year Industrial Co.,Ltd. (SHSE:601002) shareholders for doubting their decision to hold, with the stock down 27% over a half decade. On top of that, the share price is down 12% in the last week. However, this move may have been influenced by the broader market, which fell 5.6% in that time.
Since Gem-Year IndustrialLtd has shed CN¥547m from its value in the past 7 days, let's see if the longer term decline has been driven by the business' economics.
View our latest analysis for Gem-Year IndustrialLtd
While Gem-Year IndustrialLtd made a small profit, in the last year, we think that the market is probably more focussed on the top line growth at the moment. Generally speaking, we'd consider a stock like this alongside loss-making companies, simply because the quantum of the profit is so low. It would be hard to believe in a more profitable future without growing revenues.
In the last five years Gem-Year IndustrialLtd saw its revenue shrink by 6.2% per year. That's not what investors generally want to see. The stock hasn't done well for shareholders in the last five years, falling 5%, annualized. But it doesn't surprise given the falling revenue. Without profits, its hard to see how shareholders win if the revenue keeps falling.
You can see how earnings and revenue have changed over time in the image below (click on the chart to see the exact values).
This free interactive report on Gem-Year IndustrialLtd's balance sheet strength is a great place to start, if you want to investigate the stock further.
What About Dividends?
When looking at investment returns, it is important to consider the difference between total shareholder return (TSR) and share price return. The TSR is a return calculation that accounts for the value of cash dividends (assuming that any dividend received was reinvested) and the calculated value of any discounted capital raisings and spin-offs. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. As it happens, Gem-Year IndustrialLtd's TSR for the last 5 years was -24%, which exceeds the share price return mentioned earlier. And there's no prize for guessing that the dividend payments largely explain the divergence!
A Different Perspective
While it's never nice to take a loss, Gem-Year IndustrialLtd shareholders can take comfort that , including dividends,their trailing twelve month loss of 7.4% wasn't as bad as the market loss of around 21%. Given the total loss of 4% per year over five years, it seems returns have deteriorated in the last twelve months. Whilst Baron Rothschild does tell the investor "buy when there's blood in the streets, even if the blood is your own", buyers would need to examine the data carefully to be comfortable that the business itself is sound. It's always interesting to track share price performance over the longer term. But to understand Gem-Year IndustrialLtd better, we need to consider many other factors. Like risks, for instance. Every company has them, and we've spotted 3 warning signs for Gem-Year IndustrialLtd (of which 1 doesn't sit too well with us!) you should know about.
For those who like to find winning investments this free list of growing companies with recent insider purchasing, could be just the ticket.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on Chinese 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.