Some stocks are best avoided. It hits us in the gut when we see fellow investors suffer a loss. Anyone who held Century Sage Scientific Holdings Limited (HKG:1450) for five years would be nursing their metaphorical wounds since the share price dropped 89% in that time. And we doubt long term believers are the only worried holders, since the stock price has declined 31% over the last twelve months. Furthermore, it's down 15% in about a quarter. That's not much fun for holders.
While a drop like that is definitely a body blow, money isn't as important as health and happiness.
Because Century Sage Scientific Holdings made a loss in the last twelve months, we think the market is probably more focussed on revenue and revenue growth, at least for now. When a company doesn't make profits, we'd generally expect to see good revenue growth. That's because fast revenue growth can be easily extrapolated to forecast profits, often of considerable size.
Over half a decade Century Sage Scientific Holdings reduced its trailing twelve month revenue by 18% for each year. That puts it in an unattractive cohort, to put it mildly. So it's not that strange that the share price dropped 36% per year in that period. This kind of price performance makes us very wary, especially when combined with falling revenue. Ironically, that behavior could create an opportunity for the contrarian investor - but only if there are good reasons to predict a brighter future.
The graphic below depicts how earnings and revenue have changed over time (unveil the exact values by clicking on the image).
Take a more thorough look at Century Sage Scientific Holdings's financial health with this free report on its balance sheet.
A Different Perspective
Investors in Century Sage Scientific Holdings had a tough year, with a total loss of 31%, against a market gain of about 14%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. Unfortunately, longer term shareholders are suffering worse, given the loss of 36% doled out over the last five years. We'd need to see some sustained improvements in the key metrics before we could muster much enthusiasm. You could get a better understanding of Century Sage Scientific Holdings's growth by checking out this more detailed historical graph of earnings, revenue and cash flow.
But note: Century Sage Scientific Holdings may not be the best stock to buy. So take a peek at this free list of interesting companies with past earnings growth (and further growth forecast).
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 firstname.lastname@example.org. 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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