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Even the best stock pickers will make plenty of bad investments. Anyone who held Meitu, Inc. (HKG:1357) over the last year knows what a loser feels like. To wit the share price is down 65% in that time. Meitu 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 34% in about a quarter. That's not much fun for holders.
Meitu isn't a profitable company, so it is unlikely we'll see a strong correlation between its share price and its earnings per share (EPS). Arguably revenue is our next best option. 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.
In just one year Meitu saw its revenue fall by 38%. That's not what investors generally want to see. In the absence of profits, it's not unreasonable that the share price fell 65%. Fingers crossed this is the low ebb for the stock. We have a natural aversion to companies that are losing money and shrinking revenue. But perhaps that is being too careful.
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.
We consider it positive that insiders have made significant purchases in the last year. Even so, future earnings will be far more important to whether current shareholders make money. If you are thinking of buying or selling Meitu stock, you should check out this free report showing analyst profit forecasts.
A Different Perspective
Meitu shareholders are down 65% for the year, even worse than the market loss of 13%. There's no doubt that's a disappointment, but the stock may well have fared better in a stronger market. The share price decline has continued throughout the most recent three months, down 34%, suggesting an absence of enthusiasm from investors. Given the relatively short history of this stock, we'd remain pretty wary until we see some strong business performance. 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 Meitu by clicking this link.
If you like to buy stocks alongside management, then you might just love this free list of companies. (Hint: insiders have been buying them).
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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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.