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Long term investing works well, but it doesn't always work for each individual stock. It hits us in the gut when we see fellow investors suffer a loss. Spare a thought for those who held Yanchang Petroleum International Limited (HKG:346) for five whole years - as the share price tanked 87%. And we doubt long term believers are the only worried holders, since the stock price has declined 37% over the last twelve months. Furthermore, it's down 43% in about a quarter. That's not much fun for holders.
We really feel for shareholders in this scenario. It's a good reminder of the importance of diversification, and it's worth keeping in mind there's more to life than money, anyway.
Check out our latest analysis for Yanchang Petroleum International
Yanchang Petroleum International 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 it's hard to be confident a company will be sustainable if revenue growth is negligible, and it never makes a profit.
Over half a decade Yanchang Petroleum International reduced its trailing twelve month revenue by 17% for each year. That's definitely a weaker result than most pre-profit companies report. So it's not that strange that the share price dropped 33% per year in that 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 image below shows how earnings and revenue have tracked over time (if you click on the image you can see greater detail).
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
We regret to report that Yanchang Petroleum International shareholders are down 37% for the year. Unfortunately, that's worse than the broader market decline of 11%. However, it could simply be that the share price has been impacted by broader market jitters. It might be worth keeping an eye on the fundamentals, in case there's a good opportunity. Unfortunately, last year's performance may indicate unresolved challenges, given that it was worse than the annualised loss of 33% over the last half decade. Generally speaking long term share price weakness can be a bad sign, though contrarian investors might want to research the stock in hope of a turnaround. Shareholders might want to examine this detailed historical graph of past earnings, revenue and cash flow.