Even though FS Development Investment Holdings (SZSE:300071) has lost CN¥617m market cap in last 7 days, shareholders are still up 140% over 5 years

It might be of some concern to shareholders to see the FS Development Investment Holdings (SZSE:300071) share price down 17% in the last month. But that doesn't change the fact that the returns over the last five years have been very strong. We think most investors would be happy with the 140% return, over that period. To some, the recent pullback wouldn't be surprising after such a fast rise. The more important question is whether the stock is too cheap or too expensive today.

In light of the stock dropping 10% in the past week, we want to investigate the longer term story, and see if fundamentals have been the driver of the company's positive five-year return.

FS Development Investment Holdings wasn't profitable in the last twelve months, it is unlikely we'll see a strong correlation between its share price and its earnings per share (EPS). Arguably revenue is our next best option. Generally speaking, companies without profits are expected to grow revenue every year, and at a good clip. That's because it's hard to be confident a company will be sustainable if revenue growth is negligible, and it never makes a profit.

In the last 5 years FS Development Investment Holdings saw its revenue shrink by 7.9% per year. Given that scenario, we wouldn't have expected the share price to rise 19% per year, but that's what it did. It just goes to show tht the market is forward looking, and it's not always easy to predict the future based on past trends. Still, this situation makes us a little wary of the stock.

The graphic below depicts how earnings and revenue have changed over time (unveil the exact values by clicking on the image).

If you are thinking of buying or selling FS Development Investment Holdings stock, you should check out this FREE detailed report on its balance sheet.

A Different Perspective

We're pleased to report that FS Development Investment Holdings shareholders have received a total shareholder return of 80% over one year. That gain is better than the annual TSR over five years, which is 19%. Therefore it seems like sentiment around the company has been positive lately. In the best case scenario, this may hint at some real business momentum, implying that now could be a great time to delve deeper. It's always interesting to track share price performance over the longer term. But to understand FS Development Investment Holdings better, we need to consider many other factors. For example, we've discovered 2 warning signs for FS Development Investment Holdings that you should be aware of before investing here.

We will like FS Development Investment Holdings better if we see some big insider buys. While we wait, check out this free list of undervalued stocks (mostly small caps) with considerable, recent, insider buying.

Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on Chinese exchanges.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. 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.