Some stocks are best avoided. It hits us in the gut when we see fellow investors suffer a loss. Anyone who held Wanda Hotel Development Company Limited (HKG:169) for five years would be nursing their metaphorical wounds since the share price dropped 77% in that time. We also note that the stock has performed poorly over the last year, with the share price down 39%. It's up 1.3% in the last seven days.
Wanda Hotel Development 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. As you can imagine, fast revenue growth, when maintained, often leads to fast profit growth.
Over five years, Wanda Hotel Development grew its revenue at 9.4% per year. That's a fairly respectable growth rate. So the stock price fall of 26% per year seems pretty steep. The market can be a harsh master when your company is losing money and revenue growth disappoints.
You can see how earnings and revenue have changed over time in the image below (click on the chart to see the exact values).
Take a more thorough look at Wanda Hotel Development's financial health with this free report on its balance sheet.
A Different Perspective
We regret to report that Wanda Hotel Development shareholders are down 39% for the year. Unfortunately, that's worse than the broader market decline of 2.5%. 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 26% 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 businesses. Shareholders might want to examine this detailed historical graph of past earnings, revenue and cash flow.
If you would prefer to check out another company -- one with potentially superior financials -- then do not miss this free list of companies that have proven they can 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 email@example.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.
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