Generally speaking long term investing is the way to go. But no-one is immune from buying too high. For example the China Tontine Wines Group Limited (HKG:389) share price dropped 60% over five years. That’s not a lot of fun for true believers. Even worse, it’s down 15% in about a month, which isn’t fun at all. We do note, however, that the broader market is down 12% in that period, and this may have weighed on the share price.
See our latest analysis for China Tontine Wines Group
Given that China Tontine Wines 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 the last half decade, China Tontine Wines Group saw its revenue increase by 5.7% per year. That’s not a very high growth rate considering it doesn’t make profits. It’s likely this weak growth has contributed to an annualised return of 17% for the last five years. We want to see an acceleration of revenue growth (or profits) before showing much interest in this one. However, it’s possible too many in the market will ignore it, and there may be an opportunity if it starts to recover down the track.
The image below shows how earnings and revenue have tracked over time (if you click on the image you can see greater detail).
SEHK:389 Income Statement, March 16th 2020
It’s good to see that there was some significant insider buying in the last three months. That’s a positive. On the other hand, we think the revenue and earnings trends are much more meaningful measures of the business. Dive deeper into the earnings by checking this interactive graph of China Tontine Wines Group’s earnings, revenue and cash flow.
A Different Perspective
While the broader market lost about 15% in the twelve months, China Tontine Wines Group shareholders did even worse, losing 20%. 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 17% 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. It’s always interesting to track share price performance over the longer term. But to understand China Tontine Wines Group better, we need to consider many other factors. Consider risks, for instance. Every company has them, and we’ve spotted 3 warning signs for China Tontine Wines Group you should know about.
China Tontine Wines Group 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.