The nature of investing is that you win some, and you lose some. And there's no doubt that Hunan Corun New Energy Co., Ltd. (SHSE:600478) stock has had a really bad year. The share price is down a hefty 68% in that time. Longer term shareholders haven't suffered as badly, since the stock is down a comparatively less painful 6.3% in three years. Shareholders have had an even rougher run lately, with the share price down 39% in the last 90 days. But this could be related to the weak market, which is down 21% in the same period.
With the stock having lost 20% in the past week, it's worth taking a look at business performance and seeing if there's any red flags.
Given that Hunan Corun New Energy only made minimal earnings in the last twelve months, we'll focus on revenue to gauge its business development. Generally speaking, we'd consider a stock like this alongside loss-making companies, simply because the quantum of the profit is so low. For shareholders to have confidence a company will grow profits significantly, it must grow revenue.
Hunan Corun New Energy grew its revenue by 22% over the last year. We think that is pretty nice growth. Unfortunately it seems investors wanted more, because the share price is down 68% in that time. It is of course possible that the business will still deliver strong growth, it will just take longer than expected to do it. To our minds it isn't enough to just look at revenue, anyway. Always consider when profits will flow.
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. But while CEO remuneration is always worth checking, the really important question is whether the company can grow earnings going forward. Before buying or selling a stock, we always recommend a close examination of historic growth trends, available here..
A Different Perspective
While the broader market lost about 28% in the twelve months, Hunan Corun New Energy shareholders did even worse, losing 68%. 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. Unfortunately, last year's performance may indicate unresolved challenges, given that it was worse than the annualised loss of 5% over the last half decade. We realise that Baron Rothschild has said investors should "buy when there is blood on the streets", but we caution that investors should first be sure they are buying a high quality business. It's always interesting to track share price performance over the longer term. But to understand Hunan Corun New Energy better, we need to consider many other factors. To that end, you should learn about the 3 warning signs we've spotted with Hunan Corun New Energy (including 2 which are concerning) .
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.