Easy Come, Easy Go: How Northeast Electric Development (HKG:42) Shareholders Got Unlucky And Saw 88% Of Their Cash Evaporate

Long term investing is the way to go, but that doesn't mean you should hold every stock forever. We really hate to see fellow investors lose their hard-earned money. Spare a thought for those who held Northeast Electric Development Company Limited (HKG:42) for five whole years - as the share price tanked 88%. We also note that the stock has performed poorly over the last year, with the share price down 53%. Shareholders have had an even rougher run lately, with the share price down 28% in the last 90 days. Of course, this share price action may well have been influenced by the 16% decline in the broader market, throughout the period.

We really feel for shareholders in this scenario. It's a good reminder of the importance of diversification, and it's worth keeping in mind there's more to life than money, anyway.

Check out our latest analysis for Northeast Electric Development

Northeast Electric Development 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. That's because it's hard to be confident a company will be sustainable if revenue growth is negligible, and it never makes a profit.

In the last five years Northeast Electric Development saw its revenue shrink by 34% per year. That's definitely a weaker result than most pre-profit companies report. So it's not altogether surprising to see the share price down 34% per year in the same time period. We don't think this is a particularly promising picture. Of course, the poor performance could mean the market has been too severe selling down. That can happen.

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 Northeast Electric Development's balance sheet strength is a great place to start, if you want to investigate the stock further.

A Different Perspective

While the broader market lost about 19% in the twelve months, Northeast Electric Development shareholders did even worse, losing 53%. However, it could simply be that the share price has been impacted by broader market jitters. It might be worth keeping an eye on the fundamentals, in case there's a good opportunity. Unfortunately, last year's performance may indicate unresolved challenges, given that it was worse than the annualised loss of 34% over the last half decade. Generally speaking long term share price weakness can be a bad sign, though contrarian investors might want to research the stock in hope of a turnaround. It's always interesting to track share price performance over the longer term. But to understand Northeast Electric Development better, we need to consider many other factors. To that end, you should learn about the 4 warning signs we've spotted with Northeast Electric Development (including 1 which is shouldn't be ignored) .

If you would prefer to check out another company -- one with potentially superior financials -- then do not miss this free list of companies that have proven they can grow earnings.

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

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned.

We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Thank you for reading.