ZhongAn Online P & C Insurance Co., Ltd. (HKG:6060) shareholders should be happy to see the share price up 17% in the last month. But that is minimal compensation for the share price under-performance over the last year. In fact, the price has declined 33% in a year, falling short of the returns you could get by investing in an index fund.
ZhongAn Online P & C Insurance isn't currently profitable, so most analysts would look to revenue growth to get an idea of how fast the underlying business is growing. When a company doesn't make profits, we'd generally expect to see good revenue growth. 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 ZhongAn Online P & C Insurance saw its revenue grow by 69%. That's a strong result which is better than most other loss making companies. Given the revenue growth, the share price drop of 33% seems quite harsh. Our sympathies to shareholders who are now underwater. Prima facie, revenue growth like that should be a good thing, so it's worth checking whether losses have stabilized. Our brains have evolved to think in linear fashion, so there's value in learning to recognize exponential growth. We are, in some ways, simply the wisest of the monkeys.
The graphic below depicts how earnings and revenue have changed over time (unveil the exact values by clicking on the image).
We're pleased to report that the CEO is remunerated more modestly than most CEOs at similarly capitalized companies. It's always worth keeping an eye on CEO pay, but a more important question is whether the company will grow earnings throughout the years. So it makes a lot of sense to check out what analysts think ZhongAn Online P & C Insurance will earn in the future (free profit forecasts).
A Different Perspective
We doubt ZhongAn Online P & C Insurance shareholders are happy with the loss of 33% over twelve months. That falls short of the market, which lost 0.2%. That's disappointing, but it's worth keeping in mind that the market-wide selling wouldn't have helped. With the stock down 6.4% over the last three months, the market doesn't seem to believe that the company has solved all its problems. Given the relatively short history of this stock, we'd remain pretty wary until we see some strong business performance. You might want to assess this data-rich visualization of its earnings, revenue and cash flow.
We will like ZhongAn Online P & C Insurance better if we see some big insider buys. While we wait, check out this free list of growing companies with considerable, recent, insider buying.
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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