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Long term investing works well, but it doesn't always work for each individual stock. We really hate to see fellow investors lose their hard-earned money. For example, we sympathize with anyone who was caught holding South China Financial Holdings Limited (HKG:619) during the five years that saw its share price drop a whopping 95%. And we doubt long term believers are the only worried holders, since the stock price has declined 62% over the last twelve months. Furthermore, it's down 35% in about a quarter. That's not much fun for holders. However, one could argue that the price has been influenced by the general market, which is down 22% in the same timeframe.
We really feel for shareholders in this scenario. It's a good reminder of the importance of diversification, and it's worth keeping in mind there's more to life than money, anyway.
See our latest analysis for South China Financial Holdings
Because South China Financial Holdings made a loss in the last twelve months, we think the market is probably more focussed on revenue and revenue growth, at least for now. Shareholders of unprofitable companies usually expect strong revenue growth. As you can imagine, fast revenue growth, when maintained, often leads to fast profit growth.
In the last half decade, South China Financial Holdings saw its revenue increase by 9.0% per year. That's a fairly respectable growth rate. So it is unexpected to see the stock down 46% per year in the last five years. The truth is that the growth might be below expectations, and investors are probably worried about the continual losses.
The company's revenue and earnings (over time) are depicted in the image below (click to see the exact numbers).
Take a more thorough look at South China Financial Holdings's financial health with this free report on its balance sheet.
A Different Perspective
We regret to report that South China Financial Holdings shareholders are down 62% for the year. Unfortunately, that's worse than the broader market decline of 23%. Having said that, it's inevitable that some stocks will be oversold in a falling market. The key is to keep your eyes on the fundamental developments. Unfortunately, last year's performance may indicate unresolved challenges, given that it was worse than the annualised loss of 43% over the last half decade. 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. It's always interesting to track share price performance over the longer term. But to understand South China Financial Holdings better, we need to consider many other factors. Consider for instance, the ever-present spectre of investment risk. We've identified 4 warning signs with South China Financial Holdings (at least 1 which is a bit concerning) , and understanding them should be part of your investment process.