Generally speaking long term investing is the way to go. But no-one is immune from buying too high. For example, after five long years the EverChina Int'l Holdings Company Limited (HKG:202) share price is a whole 51% lower. We certainly feel for shareholders who bought near the top. There was little comfort for shareholders in the last week as the price declined a further 2.4%.
EverChina Int'l Holdings 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, EverChina Int'l Holdings saw its revenue increase by 5.0% per year. That's not a very high growth rate considering it doesn't make profits. This lacklustre growth has no doubt fueled the loss of 13% per year, in that time. We want to see an acceleration of revenue growth (or profits) before showing much interest in this one. However, it's possible too many in the market will ignore it, and there may be an opportunity if it starts to recover down the track.
The graphic below depicts how earnings and revenue have changed over time (unveil the exact values by clicking on the image).
It's good to see that there was some significant insider buying in the last three months. That's a positive. On the other hand, we think the revenue and earnings trends are much more meaningful measures of the business. Dive deeper into the earnings by checking this interactive graph of EverChina Int'l Holdings's earnings, revenue and cash flow.
A Different Perspective
It's nice to see that EverChina Int'l Holdings shareholders have received a total shareholder return of 25% over the last year. There's no doubt those recent returns are much better than the TSR loss of 13% per year over five years. The long term loss makes us cautious, but the short term TSR gain certainly hints at a brighter future. Investors who like to make money usually check up on insider purchases, such as the price paid, and total amount bought. You can find out about the insider purchases of EverChina Int'l Holdings by clicking this link.
There are plenty of other companies that have insiders buying up shares. You probably do 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 HK exchanges.
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