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. At this point some shareholders may be questioning their investment in Dongguan Kingsun Optoelectronic Co.,Ltd. (SZSE:002638), since the last five years saw the share price fall 34%. Shareholders have had an even rougher run lately, with the share price down 20% in the last 90 days.
Since Dongguan Kingsun OptoelectronicLtd has shed CN¥376m from its value in the past 7 days, let's see if the longer term decline has been driven by the business' economics.
While Dongguan Kingsun OptoelectronicLtd 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. As a general rule, we think this kind of company is more comparable to loss-making stocks, since the actual profit is so low. For shareholders to have confidence a company will grow profits significantly, it must grow revenue.
Over half a decade Dongguan Kingsun OptoelectronicLtd reduced its trailing twelve month revenue by 20% for each year. That puts it in an unattractive cohort, to put it mildly. On the face of it we'd posit the share price fall of 6% compound, over five years is well justified by the fundamental deterioration. We doubt many shareholders are delighted with this share price performance. Risk averse investors probably wouldn't like this one much.
You can see below how earnings and revenue have changed over time (discover the exact values by clicking on the image).
This free interactive report on Dongguan Kingsun OptoelectronicLtd's balance sheet strength is a great place to start, if you want to investigate the stock further.
A Different Perspective
While the broader market lost about 15% in the twelve months, Dongguan Kingsun OptoelectronicLtd shareholders did even worse, losing 20%. 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 6% over the last half decade. 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. It's always interesting to track share price performance over the longer term. But to understand Dongguan Kingsun OptoelectronicLtd better, we need to consider many other factors. Even so, be aware that Dongguan Kingsun OptoelectronicLtd is showing 1 warning sign in our investment analysis , you should know about...
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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.