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Did Changing Sentiment Drive Alibaba Pictures Group's (HKG:1060) Share Price Down A Worrying 50%?

Simply Wall St

We think intelligent long term investing is the way to go. But that doesn't mean long term investors can avoid big losses. To wit, the Alibaba Pictures Group Limited (HKG:1060) share price managed to fall 50% over five long years. That's not a lot of fun for true believers. We also note that the stock has performed poorly over the last year, with the share price down 28%. Shareholders have had an even rougher run lately, with the share price down 19% in the last 90 days.

See our latest analysis for Alibaba Pictures Group

Alibaba Pictures Group wasn't profitable in the last twelve months, it is unlikely we'll see a strong correlation between its share price and its earnings per share (EPS). Arguably revenue is our next best option. When a company doesn't make profits, we'd generally expect to see good revenue growth. 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 half decade, Alibaba Pictures Group saw its revenue increase by 53% per year. That's well above most other pre-profit companies. Unfortunately for shareholders the share price has dropped 13% per year - disappointing considering the growth. This could mean high expectations have been tempered, potentially because investors are looking to the bottom line. Given the revenue growth we'd consider the stock to be quite an interesting prospect if the company has a clear path to profitability.

The image below shows how earnings and revenue have tracked over time (if you click on the image you can see greater detail).

SEHK:1060 Income Statement, March 1st 2020

Balance sheet strength is crucial. It might be well worthwhile taking a look at our free report on how its financial position has changed over time.

A Different Perspective

We regret to report that Alibaba Pictures Group shareholders are down 28% for the year. Unfortunately, that's worse than the broader market decline of 8.5%. 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. Unfortunately, last year's performance may indicate unresolved challenges, given that it was worse than the annualised loss of 13% over the last half decade. We realise that Buffett 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 Alibaba Pictures Group better, we need to consider many other factors. Case in point: We've spotted 2 warning signs for Alibaba Pictures Group you should be aware of.

Of course Alibaba Pictures Group may not be the best stock to buy. So you may wish to see this free collection of growth stocks.

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.