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Every investor on earth makes bad calls sometimes. But really bad investments should be rare. So consider, for a moment, the misfortune of Lajin Entertainment Network Group Limited (HKG:8172) investors who have held the stock for three years as it declined a whopping 86%. That would be a disturbing experience. And the ride hasn't got any smoother in recent times over the last year, with the price 68% lower in that time. Furthermore, it's down 39% in about a quarter. That's not much fun for holders. This could be related to the recent financial results - you can catch up on the most recent data by reading our company report.
We really hope anyone holding through that price crash has a diversified portfolio. Even when you lose money, you don't have to lose the lesson.
See our latest analysis for Lajin Entertainment Network Group
Given that Lajin Entertainment Network Group 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 expect strong revenue growth. Some companies are willing to postpone profitability to grow revenue faster, but in that case one does expect good top-line growth.
Over three years, Lajin Entertainment Network Group grew revenue at 49% per year. That's well above most other pre-profit companies. So on the face of it we're really surprised to see the share price down 48% a year in the same time period. The share price makes us wonder if there is an issue with profitability. Sometimes fast revenue growth doesn't lead to profits. Unless the balance sheet is strong, the company might have to raise capital.
The graphic below shows how revenue and earnings have changed as management guided the business forward. If you want to see cashflow, you can click on the chart.
You can see how its balance sheet has strengthened (or weakened) over time in this free interactive graphic.
A Different Perspective
While the broader market lost about 3.6% in the twelve months, Lajin Entertainment Network Group shareholders did even worse, losing 68%. 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. Regrettably, last year's performance caps off a bad run, with the shareholders facing a total loss of 21% 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 could get a better understanding of Lajin Entertainment Network Group's growth by checking out this more detailed historical graph of earnings, revenue and cash flow.