The main aim of stock picking is to find the market-beating stocks. But the main game is to find enough winners to more than offset the losers At this point some shareholders may be questioning their investment in LIAONING ENERGY INDUSTRY Co.,LTD (SHSE:600758), since the last five years saw the share price fall 24%. Shareholders have had an even rougher run lately, with the share price down 10% in the last 90 days.
On a more encouraging note the company has added CN¥397m to its market cap in just the last 7 days, so let's see if we can determine what's driven the five-year loss for shareholders.
We don't think that LIAONING ENERGY INDUSTRYLTD's modest trailing twelve month profit has the market's full attention at the moment. We think revenue is probably a better guide. As a general rule, we think this kind of company is more comparable to loss-making stocks, since the actual profit is so low. It would be hard to believe in a more profitable future without growing revenues.
Over half a decade LIAONING ENERGY INDUSTRYLTD reduced its trailing twelve month revenue by 3.1% for each year. While far from catastrophic that is not good. The stock hasn't done well for shareholders in the last five years, falling 4%, annualized. But it doesn't surprise given the falling revenue. It might be worth watching for signs of a turnaround - buyers are probably expecting one.
You can see below how earnings and revenue have changed over time (discover the exact values by clicking on the image).
You can see how its balance sheet has strengthened (or weakened) over time in this free interactive graphic.
A Different Perspective
While the broader market lost about 14% in the twelve months, LIAONING ENERGY INDUSTRYLTD shareholders did even worse, losing 16% (even including dividends). 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. Unfortunately, last year's performance may indicate unresolved challenges, given that it was worse than the annualised loss of 4% 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. 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. Take risks, for example - LIAONING ENERGY INDUSTRYLTD has 2 warning signs we think you should be aware of.
Of course LIAONING ENERGY INDUSTRYLTD may not be the best stock to buy. So you may wish to see this free collection of growth stocks.
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.