China Tangshang Holdings Limited (HKG:674) shareholders should be happy to see the share price up 12% in the last month. But that doesn’t change the fact that the returns over the last half decade have been stomach churning. Indeed, the share price is down a whopping 76% in that time. The recent bounce might mean the long decline is over, but we are not confident. The fundamental business performance will ultimately determine if the turnaround can be sustained.
See our latest analysis for China Tangshang Holdings
Given that China Tangshang Holdings didn’t make a profit in the last twelve months, we’ll focus on revenue growth to form a quick view of its business development. Shareholders of unprofitable companies usually expect strong revenue growth. That’s because fast revenue growth can be easily extrapolated to forecast profits, often of considerable size.
Over half a decade China Tangshang Holdings reduced its trailing twelve month revenue by 18% for each year. That puts it in an unattractive cohort, to put it mildly. So it’s not that strange that the share price dropped 25% per year in that period. This kind of price performance makes us very wary, especially when combined with falling revenue. Ironically, that behavior could create an opportunity for the contrarian investor – but only if there are good reasons to predict a brighter future.
The company’s revenue and earnings (over time) are depicted in the image below (click to see the exact numbers).
SEHK:674 Income Statement April 23rd 2020
It’s probably worth noting that the CEO is paid less than the median at similar sized companies. It’s always worth keeping an eye on CEO pay, but a more important question is whether the company will grow earnings throughout the years. Before buying or selling a stock, we always recommend a close examination of historic growth trends, available here..
A Different Perspective
We regret to report that China Tangshang Holdings shareholders are down 18% for the year. Unfortunately, that’s worse than the broader market decline of 16%. 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. However, the loss over the last year isn’t as bad as the 25% per annum loss investors have suffered over the last half decade. We’d need to see some sustained improvements in the key metrics before we could muster much enthusiasm. 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 China Tangshang Holdings is showing 3 warning signs in our investment analysis , you should know about…
But note: China Tangshang Holdings may not be the best stock to buy. So take a peek at this free list of interesting companies with past earnings growth (and further growth forecast).
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on HK exchanges.
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