Some stocks are best avoided. It hits us in the gut when we see fellow investors suffer a loss. For example, we sympathize with anyone who was caught holding China Smartpay Group Holdings Limited (HKG:8325) during the five years that saw its share price drop a whopping 91%. And we doubt long term believers are the only worried holders, since the stock price has declined 68% over the last twelve months. Furthermore, it’s down 13% in about a quarter. That’s not much fun for holders. Of course, this share price action may well have been influenced by the 17% decline in the broader market, throughout the period.
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.
See our latest analysis for China Smartpay Group Holdings
Given that China Smartpay Group Holdings 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. 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 five years, China Smartpay Group Holdings grew its revenue at 6.3% per year. That’s a fairly respectable growth rate. So the stock price fall of 38% per year seems pretty steep. The truth is that the growth might be below expectations, and investors are probably worried about the continual losses.
You can see how earnings and revenue have changed over time in the image below (click on the chart to see the exact values).
You can see how its balance sheet has strengthened (or weakened) over time in this free interactive graphic.
A Different Perspective
While the broader market lost about 20% in the twelve months, China Smartpay Group Holdings shareholders did even worse, losing 68%. 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 38% per year over five years. 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. Even so, be aware that China Smartpay Group Holdings is showing 4 warning signs in our investment analysis , and 1 of those is a bit concerning…
Of course China Smartpay Group Holdings may not be the best stock to buy. So you may wish to see this free collection of growth stocks.
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.