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While it may not be enough for some shareholders, we think it is good to see the Esprit Holdings Limited (HKG:330) share price up 14% in a single quarter. But will that repair the damage for the weary investors who have owned this stock as it declined over half a decade? Probably not. Five years have seen the share price descend precipitously, down a full 84%. The recent bounce might mean the long decline is over, but we are not confident. The important question is if the business itself justifies a higher share price in the long term.
We really hope anyone holding through that price crash has a diversified portfolio. Even when you lose money, you don't have to lose the lesson.
See our latest analysis for Esprit Holdings
Given that Esprit Holdings 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. As you can imagine, fast revenue growth, when maintained, often leads to fast profit growth.
Over half a decade Esprit Holdings reduced its trailing twelve month revenue by 11% 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 31% 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.
You can see below how earnings and revenue have changed over time (discover the exact values by clicking on the image).
We consider it positive that insiders have made significant purchases in the last year. Having said that, most people consider earnings and revenue growth trends to be a more meaningful guide to the business. You can see what analysts are predicting for Esprit Holdings in this interactive graph of future profit estimates.
A Different Perspective
Investors in Esprit Holdings had a tough year, with a total loss of 14%, against a market gain of about 6.3%. 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. However, the loss over the last year isn't as bad as the 30% per annum loss investors have suffered over the last half decade. We would want clear information suggesting the company will grow, before taking the view that the share price will stabilize. Investors who like to make money usually check up on insider purchases, such as the price paid, and total amount bought. You can find out about the insider purchases of Esprit Holdings by clicking this link.