Volatility 101: Should CBK Holdings (HKG:8428) Shares Have Dropped 33%?

Simply Wall St

Passive investing in an index fund is a good way to ensure your own returns roughly match the overall market. Active investors aim to buy stocks that vastly outperform the market - but in the process, they risk under-performance. Unfortunately the CBK Holdings Limited (HKG:8428) share price slid 33% over twelve months. That's well bellow the market return of -2.4%. We wouldn't rush to judgement on CBK Holdings because we don't have a long term history to look at. It's down 34% in about a quarter.

See our latest analysis for CBK Holdings

Because CBK Holdings is loss-making, 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. Some companies are willing to postpone profitability to grow revenue faster, but in that case one does expect good top-line growth.

In just one year CBK Holdings saw its revenue fall by 34%. That looks pretty grim, at a glance. The stock price has languished lately, falling 33% in a year. That seems pretty reasonable given the lack of both profits and revenue growth. It's hard to escape the conclusion that buyers must envision either growth down the track, cost cutting, or both.

The image below shows how earnings and revenue have tracked over time (if you click on the image you can see greater detail).

SEHK:8428 Income Statement, October 10th 2019

It's probably worth noting that the CEO is paid less than the median at similar sized companies. But while CEO remuneration is always worth checking, the really important question is whether the company can grow earnings going forward. It might be well worthwhile taking a look at our free report on CBK Holdings's earnings, revenue and cash flow.

A Different Perspective

We doubt CBK Holdings shareholders are happy with the loss of 33% over twelve months. That falls short of the market, which lost 2.4%. There's no doubt that's a disappointment, but the stock may well have fared better in a stronger market. Notably, the loss over the last year isn't as bad as the 34% drop in the last three months. So it seems like some holders have been dumping the stock of late - and that's not bullish. Shareholders might want to examine this detailed historical graph of past earnings, revenue and cash flow.

Of course CBK Holdings 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 HK exchanges.

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.

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. Thank you for reading.