It's easy to match the overall market return by buying an index fund. Active investors aim to buy stocks that vastly outperform the market - but in the process, they risk under-performance. That downside risk was realized by Zheng Li Holdings Limited (HKG:8283) shareholders over the last year, as the share price declined 50%. That's well bellow the market return of 1.2%. We note that it has not been easy for shareholders over three years, either; the share price is down 37% in that time. Shareholders have had an even rougher run lately, with the share price down 33% in the last 90 days. We note that the company has reported results fairly recently; and the market is hardly delighted. You can check out the latest numbers in our company report.

Check out our latest analysis for Zheng Li Holdings

Given that Zheng Li Holdings 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. Generally speaking, companies without profits are expected to grow revenue every year, and at a good clip. That's because fast revenue growth can be easily extrapolated to forecast profits, often of considerable size.

Zheng Li Holdings grew its revenue by 41% over the last year. We think that is pretty nice growth. Unfortunately that wasn't good enough to stop the share price dropping 50%. You might even wonder if the share price was previously over-hyped. But if revenue keeps growing, then at a certain point the share price would likely follow.

You can see how earnings and revenue have changed over time in the image below (click on the chart to see the exact values).

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. It might be well worthwhile taking a look at our free report on Zheng Li Holdings's earnings, revenue and cash flow.

A Different Perspective

Zheng Li Holdings shareholders are down 50% for the year, but the broader market is up 1.2%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. Shareholders have lost 14% per year over the last three years, so the share price drop has become steeper, over the last year; a potential symptom of as yet unsolved challenges. We would be wary of buying into a company with unsolved problems, although some investors will buy into struggling stocks if they believe the price is sufficiently attractive. Shareholders might want to examine this detailed historical graph of past earnings, revenue and cash flow.