New Silkroad Culturaltainment (HKG:472 investor three-year losses grow to 28% as the stock sheds HK$128m this past week

For many investors, the main point of stock picking is to generate higher returns than the overall market. But the risk of stock picking is that you will likely buy under-performing companies. We regret to report that long term New Silkroad Culturaltainment Limited (HKG:472) shareholders have had that experience, with the share price dropping 28% in three years, versus a market return of about 51%.

With the stock having lost 21% in the past week, it's worth taking a look at business performance and seeing if there's any red flags.

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New Silkroad Culturaltainment 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. That's because fast revenue growth can be easily extrapolated to forecast profits, often of considerable size.

In the last three years New Silkroad Culturaltainment saw its revenue shrink by 76% per year. That's definitely a weaker result than most pre-profit companies report. On the face of it we'd posit the share price fall of 9% compound, over three years is well justified by the fundamental deterioration. It would probably be worth asking whether the company can fund itself to profitability. The company will need to return to revenue growth as quickly as possible, if it wants to see some enthusiasm from investors.

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

If you are thinking of buying or selling New Silkroad Culturaltainment stock, you should check out this FREE detailed report on its balance sheet.

A Different Perspective

While the broader market gained around 51% in the last year, New Silkroad Culturaltainment shareholders lost 8.3%. 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. Unfortunately, last year's performance may indicate unresolved challenges, given that it was worse than the annualised loss of 4% over the last half decade. 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. I find it very interesting to look at share price over the long term as a proxy for business performance. But to truly gain insight, we need to consider other information, too. Even so, be aware that New Silkroad Culturaltainment is showing 1 warning sign in our investment analysis , you should know about...

But note: New Silkroad Culturaltainment may not be the best stock to buy. So take a peek at this free list of interesting companies with past earnings growth (and further growth forecast).

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.