Some stocks are best avoided. We really hate to see fellow investors lose their hard-earned money. Imagine if you held CASH Financial Services Group Limited (HKG:510) for half a decade as the share price tanked 97%. And it’s not just long term holders hurting, because the stock is down 62% in the last year. The falls have accelerated recently, with the share price down 30% in the last three months. This could be related to the recent financial results – you can catch up on the most recent data by reading our company report.
While a drop like that is definitely a body blow, money isn’t as important as health and happiness.
See our latest analysis for CASH Financial Services Group
Given that CASH Financial Services 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. Some companies are willing to postpone profitability to grow revenue faster, but in that case one does expect good top-line growth.
Over half a decade CASH Financial Services Group reduced its trailing twelve month revenue by 28% for each year. That puts it in an unattractive cohort, to put it mildly. So it’s not that strange that the share price dropped 52% per year in that period. This kind of price performance makes us very wary, especially when combined with falling revenue. Ironically, that behavior could create an opportunity for the contrarian investor – but only if there are good reasons to predict a brighter future.
The graphic below depicts how earnings and revenue have changed over time (unveil the exact values by clicking on the image).
SEHK:510 Income Statement May 6th 2020
We’re pleased to report that the CEO is remunerated more modestly than most CEOs at similarly capitalized companies. It’s always worth keeping an eye on CEO pay, but a more important question is whether the company will grow earnings throughout the years. It might be well worthwhile taking a look at our free report on CASH Financial Services Group’s earnings, revenue and cash flow.
A Different Perspective
We regret to report that CASH Financial Services Group shareholders are down 62% for the year. Unfortunately, that’s worse than the broader market decline of 13%. 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 52% 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 – CASH Financial Services Group has 4 warning signs (and 1 which doesn’t sit too well with us) we think you should know about.
If you are like me, then you will not want to miss this free list of growing companies that insiders are buying.
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.
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