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Passive investing in an index fund is a good way to ensure your own returns roughly match the overall market. 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 TradeGo FinTech Limited (HKG:8017) shareholders over the last year, as the share price declined 38%. That contrasts poorly with the market return of -18%. Because TradeGo FinTech hasn't been listed for many years, the market is still learning about how the business performs. On the other hand the share price has bounced 9.7% over the last week. The buoyant market could have helped drive the share price pop, since stocks are up 5.3% in the same period.
Check out our latest analysis for TradeGo FinTech
Given that TradeGo FinTech only made minimal earnings in the last twelve months, we'll focus on revenue to gauge its business development. Generally speaking, we'd consider a stock like this alongside loss-making companies, simply because the quantum of the profit is so low. For shareholders to have confidence a company will grow profits significantly, it must grow revenue.
TradeGo FinTech's revenue didn't grow at all in the last year. In fact, it fell 2.6%. That's not what investors generally want to see. The stock price has languished lately, falling 38% in a year. What would you expect when revenue is falling, and it doesn't make a profit? We think most holders must believe revenue growth will improve, or else costs will decline.
You can see how earnings and revenue have changed over time in the image below (click on the chart to see the exact values).
It's probably worth noting that the CEO is paid less than the median at similar sized 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. Before buying or selling a stock, we always recommend a close examination of historic growth trends, available here..
A Different Perspective
TradeGo FinTech shareholders are down 38% for the year, even worse than the market loss of 18%. There's no doubt that's a disappointment, but the stock may well have fared better in a stronger market. With the stock down 1.3% over the last three months, the market doesn't seem to believe that the company has solved all its problems. Basically, most investors should be wary of buying into a poor-performing stock, unless the business itself has clearly improved. It's always interesting to track share price performance over the longer term. But to understand TradeGo FinTech better, we need to consider many other factors. To that end, you should be aware of the 4 warning signs we've spotted with TradeGo FinTech .