Yahoo Finance Imagine Owning CEFC Hong Kong Financial Investment (HKG:1520) And Trying To Stomach The 92% Share Price Drop
Want to participate in a short research study? Help shape the future of investing tools and you could win a $250 gift card!
Every investor on earth makes bad calls sometimes. But you want to avoid the really big losses like the plague. So consider, for a moment, the misfortune of CEFC Hong Kong Financial Investment Company Limited (HKG:1520) investors who have held the stock for three years as it declined a whopping 92%. That would be a disturbing experience. And the ride hasn't got any smoother in recent times over the last year, with the price 56% lower in that time. The falls have accelerated recently, with the share price down 25% in the last three months.
We really hope anyone holding through that price crash has a diversified portfolio. Even when you lose money, you don't have to lose the lesson.
Check out our latest analysis for CEFC Hong Kong Financial Investment
CEFC Hong Kong Financial Investment isn't a profitable company, so it is unlikely we'll see a strong correlation between its share price and its earnings per share (EPS). Arguably revenue is our next best option. When a company doesn't make profits, we'd generally expect to see good revenue growth. Some companies are willing to postpone profitability to grow revenue faster, but in that case one does expect good top-line growth.
Over the last three years, CEFC Hong Kong Financial Investment's revenue dropped 14% per year. That's not what investors generally want to see. The share price fall of 57% (per year, over three years) is a stern reminder that money-losing companies are expected to grow revenue. We're generally averse to companies with declining revenues, but we're not alone in that. There's no more than a snowball's chance in hell that share price will head back to its old highs, in the short term.
You can see how revenue and earnings have changed over time in the image below, (click on the chart to see cashflow).
Balance sheet strength is crucual. It might be well worthwhile taking a look at our free report on how its financial position has changed over time.
A Different Perspective
We regret to report that CEFC Hong Kong Financial Investment shareholders are down 56% for the year. Unfortunately, that's worse than the broader market decline of 9.8%. 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 33% over the last half decade. We realise that Buffett 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 businesses. Shareholders might want to examine this detailed historical graph of past earnings, revenue and cash flow.
If you would prefer to check out another company -- one with potentially superior financials -- then do not miss this free list of companies that have proven they can grow earnings.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on HK exchanges.
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.
If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned. Thank you for reading.
