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Some Chaoda Modern Agriculture (Holdings) (HKG:682) Shareholders Have Taken A Painful 77% Share Price Drop

Simply Wall St

As every investor would know, not every swing hits the sweet spot. But really bad investments should be rare. So consider, for a moment, the misfortune of Chaoda Modern Agriculture (Holdings) Limited (HKG:682) investors who have held the stock for three years as it declined a whopping 77%. That would certainly shake our confidence in the decision to own the stock. And the ride hasn't got any smoother in recent times over the last year, with the price 38% lower in that time. The falls have accelerated recently, with the share price down 13% in the last three months. 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 Chaoda Modern Agriculture (Holdings)

Given that Chaoda Modern Agriculture (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. Generally speaking, companies without profits are expected to grow revenue every year, and at a good clip. Some companies are willing to postpone profitability to grow revenue faster, but in that case one does expect good top-line growth.

In the last three years Chaoda Modern Agriculture (Holdings) saw its revenue shrink by 75% per year. That's definitely a weaker result than most pre-profit companies report. The swift share price decline at an annual compound rate of 39%, reflects this weak fundamental performance. We prefer leave it to clowns to try to catch falling knives, like this stock. It's worth remembering that investors call buying a steeply falling share price 'catching a falling knife' because it is a dangerous pass time.

The graphic below depicts how earnings and revenue have changed over time (unveil the exact values by clicking on the image).

SEHK:682 Income Statement, October 31st 2019
SEHK:682 Income Statement, October 31st 2019

Take a more thorough look at Chaoda Modern Agriculture (Holdings)'s financial health with this free report on its balance sheet.

A Different Perspective

Over the last year, Chaoda Modern Agriculture (Holdings) shareholders took a loss of 38%. In contrast the market gained about 6.8%. Of course the long term matters more than the short term, and even great stocks will sometimes have a poor year. However, the loss over the last year isn't as bad as the 39% per annum loss investors have suffered over the last three years. We would want clear information suggesting the company will grow, before taking the view that the share price will stabilize. You could get a better understanding of Chaoda Modern Agriculture (Holdings)'s growth by checking out this more detailed historical graph of earnings, revenue and cash flow.

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.

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.

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. Thank you for reading.