We’re definitely into long term investing, but some companies are simply bad investments over any time frame. We really hate to see fellow investors lose their hard-earned money. Imagine if you held Forgame Holdings Limited (HKG:484) for half a decade as the share price tanked 83%. And some of the more recent buyers are probably worried, too, with the stock falling 49% in the last year. The falls have accelerated recently, with the share price down 25% in the last three months. However, one could argue that the price has been influenced by the general market, which is down 22% in the same timeframe.
While a drop like that is definitely a body blow, money isn’t as important as health and happiness.
See our latest analysis for Forgame Holdings
Given that Forgame 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. As you can imagine, fast revenue growth, when maintained, often leads to fast profit growth.
Over half a decade Forgame Holdings reduced its trailing twelve month revenue by 24% for each year. That’s definitely a weaker result than most pre-profit companies report. So it’s not altogether surprising to see the share price down 30% per year in the same time period. We don’t think this is a particularly promising picture. Of course, the poor performance could mean the market has been too severe selling down. That can happen.
You can see how earnings and revenue have changed over time in the image below (click on the chart to see the exact values).
SEHK:484 Income Statement, March 23rd 2020
This free interactive report on Forgame Holdings’s balance sheet strength is a great place to start, if you want to investigate the stock further.
A Different Perspective
While the broader market lost about 23% in the twelve months, Forgame Holdings shareholders did even worse, losing 49%. However, it could simply be that the share price has been impacted by broader market jitters. It might be worth keeping an eye on the fundamentals, in case there’s a good opportunity. Regrettably, last year’s performance caps off a bad run, with the shareholders facing a total loss of 30% 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. While it is well worth considering the different impacts that market conditions can have on the share price, there are other factors that are even more important. For instance, we’ve identified 5 warning signs for Forgame Holdings (1 makes us a bit uncomfortable) that you should be aware of.
If you would prefer to check out another company — one with potentially superior financials — then do not miss this free list of companies that have proven they can grow earnings.
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 editorial-team@simplywallst.com. 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.