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 Arts Optical International Holdings Limited (HKG:1120) share price dropped 69% in the last half decade. That’s an unpleasant experience for long term holders. And it’s not just long term holders hurting, because the stock is down 45% in the last year. Shareholders have had an even rougher run lately, with the share price down 34% 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.
View our latest analysis for Arts Optical International Holdings
Given that Arts Optical International 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. 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.
Over half a decade Arts Optical International Holdings reduced its trailing twelve month revenue by 7.9% for each year. While far from catastrophic that is not good. With neither profit nor revenue growth, the loss of 21% per year doesn’t really surprise us. We don’t think anyone is rushing to buy this stock. Not that many investors like to invest in companies that are losing money and not growing revenue.
You can see how earnings and revenue have changed over time in the image below (click on the chart to see the exact values).
We like that insiders have been buying shares in the last twelve months. Even so, future earnings will be far more important to whether current shareholders make money. Before buying or selling a stock, we always recommend a close examination of historic growth trends, available here..
What about the Total Shareholder Return (TSR)?
We’ve already covered Arts Optical International Holdings’s share price action, but we should also mention its total shareholder return (TSR). The TSR attempts to capture the value of dividends (as if they were reinvested) as well as any spin-offs or discounted capital raisings offered to shareholders. Dividends have been really beneficial for Arts Optical International Holdings shareholders, and that cash payout explains why its total shareholder loss of 63%, over the last 5 years, isn’t as bad as the share price return.
A Different Perspective
We regret to report that Arts Optical International Holdings shareholders are down 45% for the year. Unfortunately, that’s worse than the broader market decline of 12%. 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 18% 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. 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 – Arts Optical International Holdings has 4 warning signs (and 1 which is potentially serious) we think you should know about.
Arts Optical International Holdings is not the only stock that insiders are buying. 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.
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.