SJM Holdings (HKG:880 shareholders incur further losses as stock declines 3.2% this week, taking five-year losses to 70%

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. For example, we sympathize with anyone who was caught holding SJM Holdings Limited (HKG:880) during the five years that saw its share price drop a whopping 72%. The falls have accelerated recently, with the share price down 27% in the last three months.

Since SJM Holdings has shed HK$568m from its value in the past 7 days, let's see if the longer term decline has been driven by the business' economics.

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SJM Holdings isn't currently profitable, so most analysts would look to revenue growth to get an idea of how fast the underlying business is growing. Shareholders of unprofitable companies usually desire strong revenue growth. As you can imagine, fast revenue growth, when maintained, often leads to fast profit growth.

In the last half decade, SJM Holdings saw its revenue increase by 25% 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 11% each year, in the same time period. It could be that the stock was over-hyped before. 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).

SJM Holdings is a well known stock, with plenty of analyst coverage, suggesting some visibility into future growth. You can see what analysts are predicting for SJM Holdings in this interactive graph of future profit estimates.

A Different Perspective

Investors in SJM Holdings had a tough year, with a total loss of 8.6%, against a market gain of about 32%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. Unfortunately, longer term shareholders are suffering worse, given the loss of 11% 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.

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

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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.