Introducing Food Idea Holdings (HKG:8179), The Stock That Collapsed 99%

Long term investing works well, but it doesn't always work for each individual stock. We don't wish catastrophic capital loss on anyone. For example, we sympathize with anyone who was caught holding Food Idea Holdings Limited (HKG:8179) during the five years that saw its share price drop a whopping 99%. And we doubt long term believers are the only worried holders, since the stock price has declined 70% over the last twelve months. Furthermore, it's down 46% in about a quarter. That's not much fun for holders. This could be related to the recent financial results - you can catch up on the most recent data by reading our company report.

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 Food Idea Holdings

Because Food Idea Holdings made a loss in the last twelve months, we think the market is probably more focussed on revenue and revenue growth, at least for now. Generally speaking, companies without profits are expected to grow revenue every year, and at a good clip. That's because fast revenue growth can be easily extrapolated to forecast profits, often of considerable size.

Over half a decade Food Idea Holdings reduced its trailing twelve month revenue by 9.7% for each 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 60% per year in the same time period. We don't think this is a particularly promising picture. Ironically, that behavior could create an opportunity for the contrarian investor - but only if there are good reasons to predict a brighter future.

You can see below how earnings and revenue have changed over time (discover the exact values by clicking on the image).

We like that insiders have been buying shares in the last twelve months. Even so, future earnings will be far more important to whether current shareholders make money. It might be well worthwhile taking a look at our free report on Food Idea Holdings's earnings, revenue and cash flow.

What about the Total Shareholder Return (TSR)?

We've already covered Food Idea Holdings's share price action, but we should also mention its total shareholder return (TSR). The TSR attempts to capture the value of dividends (as if they were reinvested) as well as any spin-offs or discounted capital raisings offered to shareholders. Its history of dividend payouts mean that Food Idea Holdings's TSR, which was a 99% drop over the last 5 years, was not as bad as the share price return.

A Different Perspective

While the broader market lost about 17% in the twelve months, Food Idea Holdings shareholders did even worse, losing 68%. Having said that, it's inevitable that some stocks will be oversold in a falling market. The key is to keep your eyes on the fundamental developments. Unfortunately, last year's performance may indicate unresolved challenges, given that it was worse than the annualised loss of 59% 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. It's always interesting to track share price performance over the longer term. But to understand Food Idea Holdings better, we need to consider many other factors. Case in point: We've spotted 5 warning signs for Food Idea Holdings you should be aware of, and 2 of them don't sit too well with us.

Food Idea Holdings is not the only stock that insiders are buying. For those who like to find winning investments this free list of growing companies with recent insider purchasing, could be just the ticket.

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.