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Long term investing is the way to go, but that doesn't mean you should hold every stock forever. We really hate to see fellow investors lose their hard-earned money. Imagine if you held Kantone Holdings Limited (HKG:1059) for half a decade as the share price tanked 93%. And it's not just long term holders hurting, because the stock is down 39% in the last year. There was little comfort for shareholders in the last week as the price declined a further 2.4%.
While a drop like that is definitely a body blow, money isn't as important as health and happiness.
Check out our latest analysis for Kantone Holdings
Kantone 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. Generally speaking, companies without profits are expected to grow revenue every year, and at a good clip. Some companies are willing to postpone profitability to grow revenue faster, but in that case one does expect good top-line growth.
Over half a decade Kantone Holdings reduced its trailing twelve month revenue by 44% for each year. That's definitely a weaker result than most pre-profit companies report. So it's not altogether surprising to see the share price down 42% per year in the same time period. This kind of price performance makes us very wary, especially when combined with falling revenue. Ironically, that behavior could create an opportunity for the contrarian investor - but only if there are good reasons to predict a brighter future.
The company's revenue and earnings (over time) are depicted in the image below (click to see the exact numbers).
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 11% in the twelve months, Kantone Holdings shareholders did even worse, losing 39%. 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. Unfortunately, longer term shareholders are suffering worse, given the loss of 42% doled out over the last five years. We would want clear information suggesting the company will grow, before taking the view that the share price will stabilize. You might want to assess this data-rich visualization of its earnings, revenue and cash flow.
If you like to buy stocks alongside management, then you might just love this free list of companies. (Hint: insiders have been buying them).