For many investors, the main point of stock picking is to generate higher returns than the overall market. But in any portfolio, there are likely to be some stocks that fall short of that benchmark. We regret to report that long term Guangdong Golden Dragon Development Inc. (SZSE:000712) shareholders have had that experience, with the share price dropping 33% in three years, versus a market decline of about 17%. And more recent buyers are having a tough time too, with a drop of 26% in the last year. The falls have accelerated recently, with the share price down 23% in the last three months.
With the stock having lost 7.5% in the past week, it's worth taking a look at business performance and seeing if there's any red flags.
Given that Guangdong Golden Dragon Development didn't make a profit in the last twelve months, we'll focus on revenue growth to form a quick view of its business development. Shareholders of unprofitable companies usually desire strong revenue growth. Some companies are willing to postpone profitability to grow revenue faster, but in that case one would hope for good top-line growth to make up for the lack of earnings.
In the last three years Guangdong Golden Dragon Development saw its revenue shrink by 68% per year. That means its revenue trend is very weak compared to other loss making companies. On the face of it we'd posit the share price fall of 10% compound, over three years is well justified by the fundamental deterioration. It would probably be worth asking whether the company can fund itself to profitability. The company will need to return to revenue growth as quickly as possible, if it wants to see some enthusiasm from investors.
The company's revenue and earnings (over time) are depicted in the image below (click to see the exact numbers).
If you are thinking of buying or selling Guangdong Golden Dragon Development stock, you should check out this FREE detailed report on its balance sheet.
A Different Perspective
While the broader market lost about 17% in the twelve months, Guangdong Golden Dragon Development shareholders did even worse, losing 26%. 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. Regrettably, last year's performance caps off a bad run, with the shareholders facing a total loss of 5% per year over five years. Generally speaking long term share price weakness can be a bad sign, though contrarian investors might want to research the stock in hope of a turnaround. You might want to assess this data-rich visualization of its earnings, revenue and cash flow.
Of course, you might find a fantastic investment by looking elsewhere. So take a peek at this free list of companies we expect will grow earnings.
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.