For many, the main point of investing is to generate higher returns than the overall market. But the main game is to find enough winners to more than offset the losers At this point some shareholders may be questioning their investment in Eastone Century Technology Co.,Ltd. (SZSE:300310), since the last five years saw the share price fall 25%. The share price has dropped 25% in three months. However, one could argue that the price has been influenced by the general market, which is down 17% in the same timeframe.
Since Eastone Century TechnologyLtd has shed CN¥555m from its value in the past 7 days, let's see if the longer term decline has been driven by the business' economics.
We don't think that Eastone Century TechnologyLtd's modest trailing twelve month profit has the market's full attention at the moment. We think revenue is probably a better guide. As a general rule, we think this kind of company is more comparable to loss-making stocks, since the actual profit is so low. It would be hard to believe in a more profitable future without growing revenues.
Over five years, Eastone Century TechnologyLtd grew its revenue at 0.1% per year. That's far from impressive given all the money it is losing. Given the weak growth, the share price fall of 5% isn't particularly surprising. Investors should consider how bad the losses are, and whether the company can make it to profitability with ease. It could be worth putting it on your watchlist and revisiting when it makes its maiden profit.
The graphic below depicts how earnings and revenue have changed over time (unveil the exact values by clicking on the image).
You can see how its balance sheet has strengthened (or weakened) over time in this free interactive graphic.
A Different Perspective
Although it hurts that Eastone Century TechnologyLtd returned a loss of 14% in the last twelve months, the broader market was actually worse, returning a loss of 26%. Unfortunately, last year's performance may indicate unresolved challenges, given that it's worse than the annualised loss of 5% over the last half decade. While some investors do well specializing in buying companies that are struggling (but nonetheless undervalued), don't forget that Buffett said that 'turnarounds seldom turn'. 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. Consider risks, for instance. Every company has them, and we've spotted 2 warning signs for Eastone Century TechnologyLtd you should know about.
We will like Eastone Century TechnologyLtd 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 Chinese exchanges.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.
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.