Every investor on earth makes bad calls sometimes. But you have a problem if you face massive losses more than once in a while. So consider, for a moment, the misfortune of Titan Petrochemicals Group Limited (HKG:1192) investors who have held the stock for three years as it declined a whopping 95%. That might cause some serious doubts about the merits of the initial decision to buy the stock, to put it mildly. And more recent buyers are having a tough time too, with a drop of 29% in the last year. Furthermore, it's down 28% in about a quarter. That's not much fun for holders. We note that the company has reported results fairly recently; and the market is hardly delighted. You can check out the latest numbers in our company report.
We really feel for shareholders in this scenario. It's a good reminder of the importance of diversification, and it's worth keeping in mind there's more to life than money, anyway.
Titan Petrochemicals Group 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. That's because it's hard to be confident a company will be sustainable if revenue growth is negligible, and it never makes a profit.
In the last three years Titan Petrochemicals Group saw its revenue shrink by 53% per year. That means its revenue trend is very weak compared to other loss making companies. The swift share price decline at an annual compound rate of 63%, reflects this weak fundamental performance. We prefer leave it to clowns to try to catch falling knives, like this stock. It's worth remembering that investors call buying a steeply falling share price 'catching a falling knife' because it is a dangerous pass time.
The image below shows how earnings and revenue have tracked over time (if you click on the image you can see greater detail).
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
The last twelve months weren't great for Titan Petrochemicals Group shares, which cost holders 29%, while the market was up about 4.2%. Of course the long term matters more than the short term, and even great stocks will sometimes have a poor year. However, the loss over the last year isn't as bad as the 63% per annum loss investors have suffered over the last three years. We'd need clear signs of growth in the underlying business before we could muster much enthusiasm for this one. You might want to assess this data-rich visualization of its earnings, revenue and cash flow.
For those who like to find winning investments this free list of growing companies with recent insider purchasing, could be just the ticket.
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 email@example.com. 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.