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 Zhuoxin International Holdings Limited (HKG:8266) during the five years that saw its share price drop a whopping 90%. We also note that the stock has performed poorly over the last year, with the share price down 83%. Shareholders have had an even rougher run lately, with the share price down 41% 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.
While a drop like that is definitely a body blow, money isn't as important as health and happiness.
View our latest analysis for Zhuoxin International Holdings
Zhuoxin International Holdings isn't currently profitable, so most analysts would look to revenue growth to get an idea of how fast the underlying business is growing. When a company doesn't make profits, we'd generally expect to see good revenue growth. That's because fast revenue growth can be easily extrapolated to forecast profits, often of considerable size.
Over half a decade Zhuoxin International Holdings reduced its trailing twelve month revenue by 17% for each year. That puts it in an unattractive cohort, to put it mildly. So it's not that strange that the share price dropped 37% per year in that period. We don't think this is a particularly promising picture. Of course, the poor performance could mean the market has been too severe selling down. That can happen.
The graphic below depicts how earnings and revenue have changed over time (unveil the exact values by clicking on the image).
Balance sheet strength is crucial. It might be well worthwhile taking a look at our free report on how its financial position has changed over time.
A Different Perspective
Zhuoxin International Holdings shareholders are down 83% for the year, but the market itself is up 1.2%. Even the share prices of good stocks drop sometimes, but we want to see improvements in the fundamental metrics of a business, before getting too interested. Regrettably, last year's performance caps off a bad run, with the shareholders facing a total loss of 37% 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 could get a better understanding of Zhuoxin International Holdings's growth by checking out this more detailed historical graph of earnings, revenue and cash flow.