If you are building a properly diversified stock portfolio, the chances are some of your picks will perform badly. Long term Double Medical Technology Inc. (SZSE:002901) shareholders know that all too well, since the share price is down considerably over three years. Unfortunately, they have held through a 63% decline in the share price in that time. And more recent buyers are having a tough time too, with a drop of 23% in the last year.
If the past week is anything to go by, investor sentiment for Double Medical Technology isn't positive, so let's see if there's a mismatch between fundamentals and the share price.
Check out our latest analysis for Double Medical Technology
While Double Medical Technology made a small profit, in the last year, we think that the market is probably more focussed on the top line growth at the moment. As a general rule, we think this kind of company is more comparable to loss-making stocks, since the actual profit is so low. For shareholders to have confidence a company will grow profits significantly, it must grow revenue.
Over the last three years, Double Medical Technology's revenue dropped 0.04% per year. That is not a good result. With revenue in decline, and profit but a dream, we can understand why the share price has been declining at 18% per year. Having said that, if growth is coming in the future, now may be the low ebb for the company. We don't generally like to own companies that lose money and can't grow revenues. But any company is worth looking at when it makes a maiden profit.
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 Double Medical Technology's financial health with this free report on its balance sheet.
A Different Perspective
We regret to report that Double Medical Technology shareholders are down 23% for the year. Unfortunately, that's worse than the broader market decline of 6.5%. Having said that, it's inevitable that some stocks will be oversold in a falling market. The key is to keep your eyes on the fundamental developments. Longer term investors wouldn't be so upset, since they would have made 3%, each year, over five years. It could be that the recent sell-off is an opportunity, so it may be worth checking the fundamental data for signs of a long term growth trend. It's always interesting to track share price performance over the longer term. But to understand Double Medical Technology better, we need to consider many other factors. Even so, be aware that Double Medical Technology is showing 2 warning signs in our investment analysis , you should know about...
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 Chinese 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.