To The Moon

As an investor, mistakes are inevitable. But really bad investments should be rare. So consider, for a moment, the misfortune of Hony Media Group (HKG:419) investors who have held the stock for three years as it declined a whopping 71%. That'd be enough to cause even the strongest minds some disquiet. And over the last year the share price fell 48%, so we doubt many shareholders are delighted. Shareholders have had an even rougher run lately, with the share price down 27% in the last 90 days.

With the stock having lost 15% in the past week, it's worth taking a look at business performance and seeing if there's any red flags.

View our latest analysis for Hony Media Group

Hony Media Group wasn't profitable in the last twelve months, 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. Shareholders of unprofitable companies usually desire strong revenue growth. Some companies are willing to postpone profitability to grow revenue faster, but in that case one would hope for good top-line growth to make up for the lack of earnings.

Over three years, Hony Media Group grew revenue at 41% per year. That's well above most other pre-profit companies. So why has the share priced crashed 20% per year, in the same time? The share price makes us wonder if there is an issue with profitability. Sometimes fast revenue growth doesn't lead to profits. If the company is low on cash, it may have to raise capital soon.

You can see how earnings and revenue have changed over time in the image below (click on the chart to see the exact values).

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 gained around 36% in the last year, Hony Media Group shareholders lost 48%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. Regrettably, last year's performance caps off a bad run, with the shareholders facing a total loss of 8% per year over five years. We realise that Baron Rothschild 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 business. It's always interesting to track share price performance over the longer term. But to understand Hony Media Group better, we need to consider many other factors. To that end, you should learn about the 3 warning signs we've spotted with Hony Media Group (including 2 which don't sit too well with us) .

If you like to buy stocks alongside management, then you might just love this free list of companies. (Hint: many of them are unnoticed AND have attractive valuation).

Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on Hong Kong exchanges.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.