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Investors Push Hainan Yedao (Group)Ltd (SHSE:600238) 9.5% Lower This Week, Company's Increasing Losses Might Be to Blame

Simply Wall St ·  Dec 22, 2023 17:02

The most you can lose on any stock (assuming you don't use leverage) is 100% of your money. But on the bright side, if you buy shares in a high quality company at the right price, you can gain well over 100%. Long term Hainan Yedao (Group) Co.,Ltd (SHSE:600238) shareholders would be well aware of this, since the stock is up 114% in five years. On the other hand, the stock price has retraced 9.5% in the last week. But note that the broader market is down 1.7% since last week, and this may have impacted Hainan Yedao (Group)Ltd's share price.

While the stock has fallen 9.5% this week, it's worth focusing on the longer term and seeing if the stocks historical returns have been driven by the underlying fundamentals.

See our latest analysis for Hainan Yedao (Group)Ltd

Hainan Yedao (Group)Ltd isn't currently profitable, so most analysts would look to revenue growth to get an idea of how fast the underlying business is growing. 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 5 years Hainan Yedao (Group)Ltd saw its revenue shrink by 12% per year. On the other hand, the share price done the opposite, gaining 16%, compound, each year. It's a good reminder that expectations about the future, not the past history, always impact share prices. Still, this situation makes us a little wary of the stock.

The company's revenue and earnings (over time) are depicted in the image below (click to see the exact numbers).

earnings-and-revenue-growth
SHSE:600238 Earnings and Revenue Growth December 22nd 2023

This free interactive report on Hainan Yedao (Group)Ltd's balance sheet strength is a great place to start, if you want to investigate the stock further.

A Different Perspective

While the broader market lost about 6.6% in the twelve months, Hainan Yedao (Group)Ltd shareholders did even worse, losing 30%. However, it could simply be that the share price has been impacted by broader market jitters. It might be worth keeping an eye on the fundamentals, in case there's a good opportunity. Longer term investors wouldn't be so upset, since they would have made 16%, 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. While it is well worth considering the different impacts that market conditions can have on the share price, there are other factors that are even more important. Take risks, for example - Hainan Yedao (Group)Ltd has 2 warning signs we think you should be aware of.

Of course Hainan Yedao (Group)Ltd may not be the best stock to buy. So you may wish to see this free collection of growth stocks.

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.

Disclaimer: This content is for informational and educational purposes only and does not constitute a recommendation or endorsement of any specific investment or investment strategy. Read more
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