Air China (HKG:753) investors are sitting on a loss of 26% if they invested three years ago – Simply Wall St
Many investors define successful investing as beating the market average over the long term. But if you try your hand at stock picking, your risk returning less than the market. Unfortunately, that's been the case for longer term Air China Limited (HKG:753) shareholders, since the share price is down 28% in the last three years, falling well short of the market decline of around 8.7%.
Since shareholders are down over the longer term, lets look at the underlying fundamentals over the that time and see if they've been consistent with returns.
See our latest analysis for Air China
Air China 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. As you can imagine, fast revenue growth, when maintained, often leads to fast profit growth.
Over the last three years, Air China's revenue dropped 23% per year. That means its revenue trend is very weak compared to other loss making companies. 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. Of course, it is possible for businesses to bounce back from a revenue drop – but we'd want to see that before getting interested.
The graphic below depicts how earnings and revenue have changed over time (unveil the exact values by clicking on the image).
Air China is well known by investors, and plenty of clever analysts have tried to predict the future profit levels. So we recommend checking out this free report showing consensus forecasts
Air China shareholders are up 2.6% for the year. But that return falls short of the market. On the bright side, that's still a gain, and it's actually better than the average return of 0.4% over half a decade This suggests the company might be improving over time. 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. For instance, we've identified 1 warning sign for Air China that you should be aware of.
We will like Air China better if we see some big insider buys. While we wait, check out this free list of growing companies with considerable, recent, insider buying.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on HK exchanges.
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.
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