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Passive investing in an index fund is a good way to ensure your own returns roughly match the overall market. But if you buy individual stocks, you can do both better or worse than that. That downside risk was realized by Yue Da International Holdings Limited (HKG:629) shareholders over the last year, as the share price declined 30%. That contrasts poorly with the market return of -5.3%. On the other hand, the stock is actually up 30% over three years. Furthermore, it's down 29% in about a quarter. That's not much fun for holders.
See our latest analysis for Yue Da International Holdings
Yue Da International Holdings isn't a profitable company, so it is unlikely we'll see a strong correlation between its share price and its earnings per share (EPS). Arguably revenue is our next best option. 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.
In just one year Yue Da International Holdings saw its revenue fall by 16%. That looks pretty grim, at a glance. The stock price has languished lately, falling 30% in a year. That seems pretty reasonable given the lack of both profits and revenue growth. We think most holders must believe revenue growth will improve, or else costs will decline.
The company's revenue and earnings (over time) are depicted in the image below (click to see the exact numbers).
We're pleased to report that the CEO is remunerated more modestly than most CEOs at similarly capitalized companies. It's always worth keeping an eye on CEO pay, but a more important question is whether the company will grow earnings throughout the years. Dive deeper into the earnings by checking this interactive graph of Yue Da International Holdings's earnings, revenue and cash flow.
A Different Perspective
While the broader market lost about 5.3% in the twelve months, Yue Da International Holdings shareholders did even worse, losing 30%. 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 3.6% per year over five years. We realise that Buffett 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 businesses. You might want to assess this data-rich visualization of its earnings, revenue and cash flow.