Some stocks are best avoided. We really hate to see fellow investors lose their hard-earned money. For example, we sympathize with anyone who was caught holding Shandong Molong Petroleum Machinery Company Limited (HKG:568) during the five years that saw its share price drop a whopping 89%. And some of the more recent buyers are probably worried, too, with the stock falling 62% in the last year. Shareholders have had an even rougher run lately, with the share price down 39% in the last 90 days. This could be related to the recent financial results – you can catch up on the most recent data by reading our company report.
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 Shandong Molong Petroleum Machinery
Given that Shandong Molong Petroleum Machinery 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. Shareholders of unprofitable companies usually expect strong revenue growth. As you can imagine, fast revenue growth, when maintained, often leads to fast profit growth.
In the last half decade, Shandong Molong Petroleum Machinery saw its revenue increase by 24% per year. That’s better than most loss-making companies. So it’s not at all clear to us why the share price sunk 36% throughout that time. You’d have to assume the market is worried that profits won’t come soon enough. We’d recommend carefully checking for indications of future growth – and balance sheet threats – before considering a purchase.
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 Shandong Molong Petroleum Machinery’s financial health with this free report on its balance sheet.
A Different Perspective
While the broader market lost about 17% in the twelve months, Shandong Molong Petroleum Machinery shareholders did even worse, losing 62%. 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. Regrettably, last year’s performance caps off a bad run, with the shareholders facing a total loss of 36% per year over five years. 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 risks, for instance. Every company has them, and we’ve spotted 2 warning signs for Shandong Molong Petroleum Machinery you should know about.
But note: Shandong Molong Petroleum Machinery 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 HK exchanges.
If you spot an error that warrants correction, please contact the editor at [email protected] 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.
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. Thank you for reading.