Further weakness as Shanghai Wondertek Software (SHSE:603189) drops 11% this week, taking three-year losses to 15%

Shanghai Wondertek Software Co., Ltd (SHSE:603189) shareholders should be happy to see the share price up 29% in the last quarter. But that doesn't change the fact that the returns over the last three years haven't been great. To be specific, the share price is a full 15% lower, while the market is down , with a return of (-13%)..

Since Shanghai Wondertek Software has shed CN¥588m from its value in the past 7 days, let's see if the longer term decline has been driven by the business' economics.

See our latest analysis for Shanghai Wondertek Software

Given that Shanghai Wondertek Software 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. Generally speaking, companies without profits are expected to grow revenue every year, and at a good clip. As you can imagine, fast revenue growth, when maintained, often leads to fast profit growth.

In the last three years Shanghai Wondertek Software saw its revenue shrink by 6.2% per year. That is not a good result. The stock has disappointed holders over the last three years, falling 5%, annualized. And with no profits, and weak revenue, are you surprised? Of course, sentiment could become too negative, and the company may actually be making progress to profitability.

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

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. If you are thinking of buying or selling Shanghai Wondertek Software stock, you should check out this free report showing analyst profit forecasts.

What About Dividends?

When looking at investment returns, it is important to consider the difference between total shareholder return (TSR) and share price return. The TSR is a return calculation that accounts for the value of cash dividends (assuming that any dividend received was reinvested) and the calculated value of any discounted capital raisings and spin-offs. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. In the case of Shanghai Wondertek Software, it has a TSR of -15% for the last 3 years. That exceeds its share price return that we previously mentioned. This is largely a result of its dividend payments!

A Different Perspective

Investors in Shanghai Wondertek Software had a tough year, with a total loss of 4.3% (including dividends), against a market gain of about 14%. Even the share prices of good stocks drop sometimes, but we want to see improvements in the fundamental metrics of a business, before getting too interested. Longer term investors wouldn't be so upset, since they would have made 3%, each year, over five years. If the fundamental data continues to indicate long term sustainable growth, the current sell-off could be an opportunity worth considering. It's always interesting to track share price performance over the longer term. But to understand Shanghai Wondertek Software better, we need to consider many other factors. Even so, be aware that Shanghai Wondertek Software is showing 2 warning signs in our investment analysis , and 1 of those can't be ignored...

Of course Shanghai Wondertek Software 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 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.