If You Had Bought EFT Solutions Holdings (HKG:8062) Stock Three Years Ago, You'd Be Sitting On A 49% Loss, Today

In order to justify the effort of selecting individual stocks, it's worth striving to beat the returns from a market index fund. But the risk of stock picking is that you will likely buy under-performing companies. Unfortunately, that's been the case for longer term EFT Solutions Holdings Limited (HKG:8062) shareholders, since the share price is down 49% in the last three years, falling well short of the market return of around -3.7%. And the ride hasn't got any smoother in recent times over the last year, with the price 38% lower in that time. It's down 3.2% in the last seven days.

See our latest analysis for EFT Solutions Holdings

We don't think that EFT Solutions Holdings'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. For shareholders to have confidence a company will grow profits significantly, it must grow revenue.

Over three years, EFT Solutions Holdings grew revenue at 33% per year. That's well above most other pre-profit companies. While its revenue increased, the share price dropped at a rate of 20% per year. That seems like an unlucky result for holders. It seems likely that actual growth fell short of shareholders' expectations. Before considering a purchase, investors should consider how quickly expenses are growing, relative to revenue.

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

We consider it positive that insiders have made significant purchases in the last year. Even so, future earnings will be far more important to whether current shareholders make money. This free interactive report on EFT Solutions Holdings's earnings, revenue and cash flow is a great place to start, if you want to investigate the stock further.

A Different Perspective

EFT Solutions Holdings shareholders are down 38% for the year, falling short of the market return. Meanwhile, the broader market slid about 19%, likely weighing on the stock. The three-year loss of 20% per year isn't as bad as the last twelve months, suggesting that the company has not been able to convince the market it has solved its problems. We would be wary of buying into a company with unsolved problems, although some investors will buy into struggling stocks if they believe the price is sufficiently attractive. 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 EFT Solutions Holdings is showing 4 warning signs in our investment analysis , and 2 of those are a bit concerning...

There are plenty of other companies that have insiders buying up shares. You probably do not want to miss this free list of growing companies that insiders are buying.

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.

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