It's not possible to invest over long periods without making some bad investments. But really bad investments should be rare. So spare a thought for the long term shareholders of Fortunet e-Commerce Group Limited (HKG:1039); the share price is down a whopping 75% in the last three years. That'd be enough to cause even the strongest minds some disquiet. And over the last year the share price fell 48%, so we doubt many shareholders are delighted.
Fortunet e-Commerce Group isn't currently profitable, so most analysts would look to revenue growth to get an idea of how fast the underlying business is growing. Shareholders of unprofitable companies usually expect strong revenue growth. That's because it's hard to be confident a company will be sustainable if revenue growth is negligible, and it never makes a profit.
Over the last three years, Fortunet e-Commerce Group's revenue dropped 65% per year. That means its revenue trend is very weak compared to other loss making companies. The swift share price decline at an annual compound rate of 37%, reflects this weak fundamental performance. Never forget that loss making companies with falling revenue can and do cause losses for everyday investors. It's worth remembering that investors call buying a steeply falling share price 'catching a falling knife' because it is a dangerous pass time.
You can see how earnings and revenue have changed over time in the image below (click on the chart to see the exact values).
You can see how its balance sheet has strengthened (or weakened) over time in this free interactive graphic.
A Different Perspective
While the broader market gained around 3.0% in the last year, Fortunet e-Commerce Group shareholders lost 48%. Even the share prices of good stocks drop sometimes, but we want to see improvements in the fundamental metrics of a business, before getting too interested. Regrettably, last year's performance caps off a bad run, with the shareholders facing a total loss of 8.1% per year over five years. Generally speaking long term share price weakness can be a bad sign, though contrarian investors might want to research the stock in hope of a turnaround. It's always interesting to track share price performance over the longer term. But to understand Fortunet e-Commerce Group better, we need to consider many other factors. Consider for instance, the ever-present spectre of investment risk. We've identified 3 warning signs with Fortunet e-Commerce Group (at least 1 which is potentially serious) , and understanding them should be part of your investment process.
We will like Fortunet e-Commerce Group better if we see some big insider buys. While we wait, check out this free list of growing companies with considerable, recent, insider buying.
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 firstname.lastname@example.org. 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.
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