As an investor, mistakes are inevitable. But you want to avoid the really big losses like the plague. So spare a thought for the long term shareholders of Frontier Services Group Limited (HKG:500); the share price is down a whopping 79% in the last three years. That would be a disturbing experience. The more recent news is of little comfort, with the share price down 27% in a year. The last week also saw the share price slip down another 17%.
With the stock having lost 17% in the past week, it's worth taking a look at business performance and seeing if there's any red flags.
Check out our latest analysis for Frontier Services Group
We don't think that Frontier Services Group's modest trailing twelve month profit has the market's full attention at the moment. We think revenue is probably a better guide. Generally speaking, we'd consider a stock like this alongside loss-making companies, simply because the quantum of the profit is so low. It would be hard to believe in a more profitable future without growing revenues.
In the last three years, Frontier Services Group saw its revenue grow by 3.2% per year, compound. That's not a very high growth rate considering it doesn't make profits. Nonetheless, it's fair to say the rapidly declining share price (down 21%, compound, over three years) suggests the market is very disappointed with this level of growth. We generally don't try to 'catch the falling knife'. Before considering a purchase, take a look at the losses the company is racking up.
The company's revenue and earnings (over time) are depicted in the image below (click to see the exact numbers).
This free interactive report on Frontier Services Group's balance sheet strength is a great place to start, if you want to investigate the stock further.
A Different Perspective
Investors in Frontier Services Group had a tough year, with a total loss of 27%, against a market gain of about 31%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. Unfortunately, last year's performance may indicate unresolved challenges, given that it was worse than the annualised loss of 12% 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. For example, we've discovered 4 warning signs for Frontier Services Group that you should be aware of before investing here.
Of course Frontier Services Group may not be the best stock to buy. So you may wish to see this free collection of growth stocks.
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.