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Did Changing Sentiment Drive China Green Agriculture's (NYSE:CGA) Share Price Down A Painful 88%?

Simply Wall St

Long term investing is the way to go, but that doesn't mean you should hold every stock forever. It hits us in the gut when we see fellow investors suffer a loss. Spare a thought for those who held China Green Agriculture, Inc. (NYSE:CGA) for five whole years - as the share price tanked 88%. We also note that the stock has performed poorly over the last year, with the share price down 55%. Even worse, it's down 23% in about a month, which isn't fun at all. Importantly, this could be a market reaction to the recently released financial results. You can check out the latest numbers in our company report.

We really hope anyone holding through that price crash has a diversified portfolio. Even when you lose money, you don't have to lose the lesson.

Check out our latest analysis for China Green Agriculture

China Green Agriculture isn't currently profitable, so most analysts would look to revenue growth to get an idea of how fast the underlying business is growing. 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, China Green Agriculture saw its revenue increase by 2.4% per year. That's far from impressive given all the money it is losing. It's not so sure that share price crash of 34% per year is completely deserved, but the market is doubtless disappointed. We'd be pretty cautious about this one, although the sell-off may be too severe. A company like this generally needs to produce profits before it can find favour with new investors.

You can see below how earnings and revenue have changed over time (discover the exact values by clicking on the image).

NYSE:CGA Income Statement, February 18th 2020

This free interactive report on China Green Agriculture's balance sheet strength is a great place to start, if you want to investigate the stock further.

A Different Perspective

Investors in China Green Agriculture had a tough year, with a total loss of 55%, against a market gain of about 22%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. Regrettably, last year's performance caps off a bad run, with the shareholders facing a total loss of 34% per year over five years. 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 China Green Agriculture better, we need to consider many other factors. For instance, we've identified 4 warning signs for China Green Agriculture (1 doesn't sit too well with us) that you should be aware of.

If you are like me, then you will not want to miss this free list of growing companies that insiders are buying.

Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on US 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.