Over the last month the Ouhua Energy Holdings Limited (SGX:AJ2) has been much stronger than before, rebounding by 33%. But that isn't much consolation for the painful drop we've seen in the last year. During that time the share price has plummeted like a stone, down 80%. It's not uncommon to see a bounce after a drop like that. The bigger issue is whether the company can sustain the momentum in the long term.
Given that Ouhua Energy Holdings didn't make a profit in the last twelve months, we'll focus on revenue growth to form a quick view of its business development. Generally speaking, companies without profits are expected to grow revenue every year, and at a good clip. As you can imagine, fast revenue growth, when maintained, often leads to fast profit growth.
Ouhua Energy Holdings grew its revenue by 11% over the last year. While that may seem decent it isn't great considering the company is still making a loss. Even so you could argue that it's surprising that the share price has tanked 80%. Clearly the market was expecting better, and this may blow out projections of profitability. If and only if this company is still likely to succeed, just a little slower, this could be a good opportunity.
The company's revenue and earnings (over time) are depicted in the image below (click to see the exact numbers).
We like that insiders have been buying shares in the last twelve months. Having said that, most people consider earnings and revenue growth trends to be a more meaningful guide to the business. It might be well worthwhile taking a look at our free report on Ouhua Energy Holdings's earnings, revenue and cash flow.
A Different Perspective
Ouhua Energy Holdings shareholders are down 80% for the year, but the market itself is up 6.4%. Even the share prices of good stocks drop sometimes, but we want to see improvements in the fundamental metrics of a business, before getting too interested. Regrettably, last year's performance caps off a bad run, with the shareholders facing a total loss of 11% per year over five years. Generally speaking long term share price weakness can be a bad sign, though contrarian investors might want to research the stock in hope of a turnaround. 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. Take risks, for example - Ouhua Energy Holdings has 3 warning signs (and 2 which don't sit too well with us) we think you should know about.
Ouhua Energy Holdings is not the only stock insiders are buying. So take a peek at this free list of growing companies with insider buying.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on SG exchanges.
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