In order to justify the effort of selecting individual stocks, it's worth striving to beat the returns from a market index fund. But even the best stock picker will only win with some selections. So we wouldn't blame long term Citychamp Watch & Jewellery Group Limited (HKG:256) shareholders for doubting their decision to hold, with the stock down 49% over a half decade. And some of the more recent buyers are probably worried, too, with the stock falling 29% in the last year. Furthermore, it's down 17% in about a quarter. That's not much fun for holders.

If the past week is anything to go by, investor sentiment for Citychamp Watch & Jewellery Group isn't positive, so let's see if there's a mismatch between fundamentals and the share price.

Given that Citychamp Watch & Jewellery Group only made minimal earnings in the last twelve months, we'll focus on revenue to gauge its business development. Generally speaking, we'd consider a stock like this alongside loss-making companies, simply because the quantum of the profit is so low. For shareholders to have confidence a company will grow profits significantly, it must grow revenue.

Over half a decade Citychamp Watch & Jewellery Group reduced its trailing twelve month revenue by 12% for each year. That's definitely a weaker result than most pre-profit companies report. It seems pretty reasonable to us that the share price dipped 8% per year in that time. This loss means the stock shareholders are probably pretty annoyed. It is possible for businesses to bounce back but as Buffett says, 'turnarounds seldom turn'.

You can see how earnings and revenue have changed over time in the image below (click on the chart to see the exact values).

It's good to see that there was some significant insider buying in the last three months. That's a positive. On the other hand, we think the revenue and earnings trends are much more meaningful measures of the business. This free interactive report on Citychamp Watch & Jewellery Group's earnings, revenue and cash flow is a great place to start, if you want to investigate the stock further.

A Different Perspective

Citychamp Watch & Jewellery Group shareholders are down 29% for the year, but the market itself is up 15%. Even the share prices of good stocks drop sometimes, but we want to see improvements in the fundamental metrics of a business, before getting too interested. Unfortunately, last year's performance may indicate unresolved challenges, given that it was worse than the annualised loss of 8% 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. Consider risks, for instance. Every company has them, and we've spotted 1 warning sign for Citychamp Watch & Jewellery Group you should know about.

Citychamp Watch & Jewellery Group is not the only stock that insiders are buying. For those who like to find lesser know companies 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 Hong Kong 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.