As every investor would know, not every swing hits the sweet spot. But really big losses can really drag down an overall portfolio. So spare a thought for the long term shareholders of Guangzheng Eye Hospital Group Co.,Ltd. (SZSE:002524); the share price is down a whopping 77% in the last three years. That would certainly shake our confidence in the decision to own the stock. And more recent buyers are having a tough time too, with a drop of 50% in the last year. Furthermore, it's down 31% in about a quarter. That's not much fun for holders.
If the past week is anything to go by, investor sentiment for Guangzheng Eye Hospital GroupLtd isn't positive, so let's see if there's a mismatch between fundamentals and the share price.
Given that Guangzheng Eye Hospital GroupLtd 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 desire strong revenue growth. That's because it's hard to be confident a company will be sustainable if revenue growth is negligible, and it never makes a profit.
Over the last three years, Guangzheng Eye Hospital GroupLtd's revenue dropped 2.5% per year. That's not what investors generally want to see. The share price fall of 21% (per year, over three years) is a stern reminder that money-losing companies are expected to grow revenue. This business clearly needs to grow revenues if it is to perform as investors hope. Don't let a share price decline ruin your calm. You make better decisions when you're calm.
You can see how earnings and revenue have changed over time in the image below (click on the chart to see the exact values).
If you are thinking of buying or selling Guangzheng Eye Hospital GroupLtd stock, you should check out this FREE detailed report on its balance sheet.
A Different Perspective
We regret to report that Guangzheng Eye Hospital GroupLtd shareholders are down 50% for the year. Unfortunately, that's worse than the broader market decline of 12%. 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 7% 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. I find it very interesting to look at share price over the long term as a proxy for business performance. But to truly gain insight, we need to consider other information, too. Consider for instance, the ever-present spectre of investment risk. We've identified 1 warning sign with Guangzheng Eye Hospital GroupLtd , and understanding them should be part of your investment process.
If you like to buy stocks alongside management, then you might just love this free list of companies. (Hint: many of them are unnoticed AND have attractive valuation).
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on Chinese exchanges.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.
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.
