Statistically speaking, long term investing is a profitable endeavour. But unfortunately, some companies simply don't succeed. For example the KFM Kingdom Holdings Limited (HKG:3816) share price dropped 69% over five years. That is extremely sub-optimal, to say the least. Furthermore, it's down 16% in about a quarter. That's not much fun for holders. Of course, this share price action may well have been influenced by the 8.5% decline in the broader market, throughout the period.
To paraphrase Benjamin Graham: Over the short term the market is a voting machine, but over the long term it's a weighing machine. One way to examine how market sentiment has changed over time is to look at the interaction between a company's share price and its earnings per share (EPS).
KFM Kingdom Holdings became profitable within the last five years. That would generally be considered a positive, so we are surprised to see the share price is down. Other metrics may better explain the share price move.
In contrast to the share price, revenue has actually increased by 0.1% a year in the five year period. A more detailed examination of the revenue and earnings may or may not explain why the share price languishes; there could be an opportunity.
You can see how earnings and revenue have changed over time in the image below (click on the chart to see the exact values).
Balance sheet strength is crucial. It might be well worthwhile taking a look at our free report on how its financial position has changed over time.
A Different Perspective
We regret to report that KFM Kingdom Holdings shareholders are down 6.6% for the year. Unfortunately, that's worse than the broader market decline of 5.0%. Having said that, it's inevitable that some stocks will be oversold in a falling market. The key is to keep your eyes on the fundamental developments. However, the loss over the last year isn't as bad as the 21% per annum loss investors have suffered over the last half decade. We'd need to see some sustained improvements in the key metrics before we could muster much enthusiasm. You could get a better understanding of KFM Kingdom Holdings's growth by checking out this more detailed historical graph of earnings, revenue and cash flow.
But note: KFM Kingdom 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.
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.
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. Thank you for reading.