Easy Come, Easy Go: How China Oceanwide Holdings (HKG:715) Shareholders Got Unlucky And Saw 81% Of Their Cash Evaporate
Long term investing works well, but it doesn't always work for each individual stock. We really hate to see fellow investors lose their hard-earned money. For example, we sympathize with anyone who was caught holding China Oceanwide Holdings Limited (HKG:715) during the five years that saw its share price drop a whopping 81%. And some of the more recent buyers are probably worried, too, with the stock falling 48% in the last year. More recently, the share price has dropped a further 13% in a month. 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.
View our latest analysis for China Oceanwide Holdings
China Oceanwide Holdings 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. That's because fast revenue growth can be easily extrapolated to forecast profits, often of considerable size.
Over half a decade China Oceanwide Holdings reduced its trailing twelve month revenue by 10% for each year. That's definitely a weaker result than most pre-profit companies report. So it's not that strange that the share price dropped 28% per year in that period. We don't think this is a particularly promising picture. Ironically, that behavior could create an opportunity for the contrarian investor - but only if there are good reasons to predict a brighter future.
The image below shows how earnings and revenue have tracked over time (if you click on the image you can see greater detail).
This free interactive report on China Oceanwide 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 9.2% in the twelve months, China Oceanwide Holdings shareholders did even worse, losing 48%. 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 28% over the last half decade. 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. Consider for instance, the ever-present spectre of investment risk. We've identified 3 warning signs with China Oceanwide Holdings (at least 2 which don't sit too well with us) , and understanding them should be part of your investment process.
Of course, you might find a fantastic investment by looking elsewhere. So take a peek at this free list of companies we expect will 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.
