Passive investing in an index fund is a good way to ensure your own returns roughly match the overall market. While individual stocks can be big winners, plenty more fail to generate satisfactory returns. That downside risk was realized by OneConnect Financial Technology Co., Ltd. (NYSE:OCFT) shareholders over the last year, as the share price declined 36%. That falls noticeably short of the market return of around 49%. OneConnect Financial Technology may have better days ahead, of course; we've only looked at a one year period. Even worse, it's down 20% in about a month, which isn't fun at all.
Because OneConnect Financial Technology 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. Some companies are willing to postpone profitability to grow revenue faster, but in that case one does expect good top-line growth.
OneConnect Financial Technology grew its revenue by 44% over the last year. We think that is pretty nice growth. Meanwhile, the share price is down 36% over twelve months, which is disappointing given the progress made. This implies the market was expecting better growth. But if revenue keeps growing, then at a certain point the share price would likely follow.
You can see below how earnings and revenue have changed over time (discover the exact values by clicking on the image).
This free interactive report on OneConnect Financial Technology's balance sheet strength is a great place to start, if you want to investigate the stock further.
A Different Perspective
Given that the market gained 49% in the last year, OneConnect Financial Technology shareholders might be miffed that they lost 36%. While the aim is to do better than that, it's worth recalling that even great long-term investments sometimes underperform for a year or more. With the stock down 17% over the last three months, the market doesn't seem to believe that the company has solved all its problems. Basically, most investors should be wary of buying into a poor-performing stock, unless the business itself has clearly improved. While it is well worth considering the different impacts that market conditions can have on the share price, there are other factors that are even more important. Consider for instance, the ever-present spectre of investment risk. We've identified 3 warning signs with OneConnect Financial Technology , and understanding them should be part of your investment process.
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 US exchanges.
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. 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.
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
