We think intelligent long term investing is the way to go. But that doesn’t mean long term investors can avoid big losses. Zooming in on an example, the Mobicon Group Limited (HKG:1213) share price dropped 68% in the last half decade. We certainly feel for shareholders who bought near the top. And some of the more recent buyers are probably worried, too, with the stock falling 38% in the last year. The falls have accelerated recently, with the share price down 35% in the last three months.
Check out our latest analysis for Mobicon Group
Given that Mobicon Group 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. Generally speaking, companies without profits are expected to grow revenue every year, and at a good clip. That’s because it’s hard to be confident a company will be sustainable if revenue growth is negligible, and it never makes a profit.
In the last five years Mobicon Group saw its revenue shrink by 8.6% per year. That’s definitely a weaker result than most pre-profit companies report. Arguably, the market has responded appropriately to this business performance by sending the share price down 21% (annualized) in the same time period. It’s fair to say most investors don’t like to invest in loss making companies with falling revenue. This looks like a really risky stock to buy, at a glance.
You can see how earnings and revenue have changed over time in the image below (click on the chart to see the exact values).
SEHK:1213 Income Statement April 28th 2020
We’re pleased to report that the CEO is remunerated more modestly than most CEOs at similarly capitalized companies. But while CEO remuneration is always worth checking, the really important question is whether the company can grow earnings going forward. Before buying or selling a stock, we always recommend a close examination of historic growth trends, available here..
A Different Perspective
While the broader market lost about 14% in the twelve months, Mobicon Group shareholders did even worse, losing 38% (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 20% 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 Mobicon Group better, we need to consider many other factors. Even so, be aware that Mobicon Group is showing 4 warning signs in our investment analysis , and 1 of those can’t be ignored…
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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 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.