It’s easy to match the overall market return by buying an index fund. When you buy individual stocks, you can make higher profits, but you also face the risk of under-performance. Investors in Zhejiang United Investment Holdings Group Limited (HKG:8366) have tasted that bitter downside in the last year, as the share price dropped 40%. That falls noticeably short of the market return of around -20%. At least the damage isn’t so bad if you look at the last three years, since the stock is down 22% in that time. It’s down 43% in about a month. This could be related to the recent financial results – you can catch up on the most recent data by reading our company report.
Check out our latest analysis for Zhejiang United Investment Holdings Group
Given that Zhejiang United Investment Holdings 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. As you can imagine, fast revenue growth, when maintained, often leads to fast profit growth.
In just one year Zhejiang United Investment Holdings Group saw its revenue fall by 12%. That looks pretty grim, at a glance. Shareholders have seen the share price drop 40% in that time. What would you expect when revenue is falling, and it doesn’t make a profit? It’s hard to escape the conclusion that buyers must envision either growth down the track, cost cutting, or both.
The image below shows how earnings and revenue have tracked over time (if you click on the image you can see greater detail).
SEHK:8366 Income Statement, March 17th 2020
You can see how its balance sheet has strengthened (or weakened) over time in this free interactive graphic.
A Different Perspective
The last twelve months weren’t great for Zhejiang United Investment Holdings Group shares, which performed worse than the market, costing holders 40%. Meanwhile, the broader market slid about 20%, likely weighing on the stock. Shareholders have lost 8.1% per year over the last three years, so the share price drop has become steeper, over the last year; a potential symptom of as yet unsolved challenges. Although Baron Rothschild famously said to “buy when there’s blood in the streets, even if the blood is your own”, he also focusses on high quality stocks with solid prospects. It’s always interesting to track share price performance over the longer term. But to understand Zhejiang United Investment Holdings Group better, we need to consider many other factors. To that end, you should learn about the 6 warning signs we’ve spotted with Zhejiang United Investment Holdings Group (including 2 which is are a bit concerning) .
For those who like to find winning investments this free list of growing companies with recent insider purchasing, could be just the ticket.
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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