We're definitely into long term investing, but some companies are simply bad investments over any time frame. We really hate to see fellow investors lose their hard-earned money. Anyone who held Hangzhou Century Co., Ltd (SZSE:300078) for five years would be nursing their metaphorical wounds since the share price dropped 71% in that time. We also note that the stock has performed poorly over the last year, with the share price down 41%. Furthermore, it's down 23% in about a quarter. That's not much fun for holders.
After losing 18% this past week, it's worth investigating the company's fundamentals to see what we can infer from past performance.
Given that Hangzhou Century 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. Generally speaking, companies without profits are expected to grow revenue every year, and at a good clip. 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 half a decade Hangzhou Century reduced its trailing twelve month revenue by 9.1% for each year. That's definitely a weaker result than most pre-profit companies report. So it's not that strange that the share price dropped 11% per year in that period. We don't think this is a particularly promising picture. Of course, the poor performance could mean the market has been too severe selling down. That can happen.
You can see below how earnings and revenue have changed over time (discover the exact values by clicking on the image).
Take a more thorough look at Hangzhou Century's financial health with this free report on its balance sheet.
A Different Perspective
While the broader market lost about 15% in the twelve months, Hangzhou Century shareholders did even worse, losing 41%. 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. Unfortunately, last year's performance may indicate unresolved challenges, given that it was worse than the annualised loss of 11% over the last half decade. 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. 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. Consider for instance, the ever-present spectre of investment risk. We've identified 2 warning signs with Hangzhou Century , and understanding them should be part of your investment process.
But note: Hangzhou Century may not be the best stock to buy. So take a peek at this free list of interesting companies with past earnings growth (and further growth forecast).
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.