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The art and science of stock market investing requires a tolerance for losing money on some of the shares you buy. But it's not unreasonable to try to avoid truly shocking capital losses. We wouldn't blame OneConnect Financial Technology Co., Ltd. (NYSE:OCFT) shareholders if they were still in shock after the stock dropped like a lead balloon, down 90% in just one year. A loss like this is a stark reminder that portfolio diversification is important. OneConnect Financial Technology hasn't been listed for long, so although we're wary of recent listings that perform poorly, it may still prove itself with time. We really hope anyone holding through that price crash has a diversified portfolio. Even when you lose money, you don't have to lose the lesson.
So let's have a look and see if the longer term performance of the company has been in line with the underlying business' progress.
OneConnect Financial Technology wasn't profitable in the last twelve months, 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. Generally speaking, companies without profits are expected to grow revenue every year, and at a good clip. Some companies are willing to postpone profitability to grow revenue faster, but in that case one does expect good top-line growth.
In the last year OneConnect Financial Technology saw its revenue grow by 22%. We think that is pretty nice growth. Unfortunately, the market wanted something better, given it sent the share price 90% lower during the year. It could be that the losses are too much for investors to handle without losing their nerve. It seems that the market has concerns about the future, because that share price action does not seem to reflect the revenue growth at all.
The image below shows how earnings and revenue have tracked over time (if you click on the image you can see greater detail).
Take a more thorough look at OneConnect Financial Technology's financial health with this free report on its balance sheet.
A Different Perspective
OneConnect Financial Technology shareholders are down 90% for the year, even worse than the market loss of 11%. There's no doubt that's a disappointment, but the stock may well have fared better in a stronger market. Putting aside the last twelve months, it's good to see the share price has rebounded by 0.7%, in the last ninety days. This could just be a bounce because the selling was too aggressive, but fingers crossed it's the start of a new trend. I find it very interesting to look at share price over the long term as a proxy for business performance. But to truly gain insight, we need to consider other information, too. Even so, be aware that OneConnect Financial Technology is showing 2 warning signs in our investment analysis , you should know about...
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 US exchanges.
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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.