We're definitely into long term investing, but some companies are simply bad investments over any time frame. We don't wish catastrophic capital loss on anyone. Anyone who held FDG Electric Vehicles Limited (HKG:729) for five years would be nursing their metaphorical wounds since the share price dropped 98% in that time. And some of the more recent buyers are probably worried, too, with the stock falling 88% in the last year. Furthermore, it's down 62% in about a quarter. That's not much fun for holders.
While a drop like that is definitely a body blow, money isn't as important as health and happiness.
See our latest analysis for FDG Electric Vehicles
Given that FDG Electric Vehicles 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. Generally speaking, companies without profits are expected to grow revenue every year, and at a good clip. That's because it's hard to be confident a company will be sustainable if revenue growth is negligible, and it never makes a profit.
Over five years, FDG Electric Vehicles grew its revenue at 33% 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 has averaged a fall of 54% each year, in the same time period. You'd have to assume the market is worried that profits won't come soon enough. We'd recommend carefully checking for indications of future growth - and balance sheet threats - before considering a purchase.
The image below shows how earnings and revenue have tracked over time (if you click on the image you can see greater detail).
It's good to see that there was some significant insider buying in the last three months. That's a positive. That said, we think earnings and revenue growth trends are even more important factors to consider. Dive deeper into the earnings by checking this interactive graph of FDG Electric Vehicles's earnings, revenue and cash flow.
A Different Perspective
While the broader market lost about 6.6% in the twelve months, FDG Electric Vehicles shareholders did even worse, losing 88%. 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 54% 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. If you want to research this stock further, the data on insider buying is an obvious place to start. You can click here to see who has been buying shares - and the price they paid.