The nature of investing is that you win some, and you lose some. Anyone who held Shun Wo Group Holdings Limited (HKG:1591) over the last year knows what a loser feels like. To wit the share price is down 54% in that time. Shun Wo Group Holdings hasn’t been listed for long, so although we’re wary of recent listings that perform poorly, it may still prove itself with time. Furthermore, it’s down 17% in about a quarter. That’s not much fun for holders.
We don’t think that Shun Wo Group Holdings’s modest trailing twelve month profit has the market’s full attention at the moment. We think revenue is probably a better guide. Many high growth companies focus on growing revenue before profits, but if revenue is the focus, it really needs to grow. That’s because it’s hard for shareholders to have confidence a company will grow profits significantly if it isn’t growing revenue.
Shun Wo Group Holdings grew its revenue by 28% over the last year. We think that is pretty nice growth. Meanwhile, the share price tanked 54%, suggesting the market had much higher expectations. It is of course possible that the business will still deliver strong growth, it will just take longer than expected to do it. To our minds it isn’t enough to just look at revenue, anyway. Always consider when profits will flow.
Depicted in the graphic below, you’ll see revenue and earnings over time. If you want more detail, you can click on the chart itself.
You can see how its balance sheet has strengthened (or weakened) over time in this free interactive graphic.
A Different Perspective
Shun Wo Group Holdings shareholders are down 54% for the year, even worse than the market loss of 5.0%. That’s disappointing, but it’s worth keeping in mind that the market-wide selling wouldn’t have helped. With the stock down 17% over the last three months, the market doesn’t seem to believe that the company has solved all its problems. Given the relatively short history of this stock, we’d remain pretty wary until we see some strong business performance. Is Shun Wo Group Holdings cheap compared to other companies? These 3 valuation measures might help you decide.
But note: Shun Wo Group Holdings may not be the best stock to buy. So take a peek at this free list of interesting companies with past earnings growth (and further growth forecast).
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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