While not a mind-blowing move, it is good to see that the Xiezhong International Holdings Limited (HKG:3663) share price has gained 12% in the last three months. But that doesn't change the fact that the returns over the last half decade have been disappointing. The share price has failed to impress anyone , down a sizable 63% during that time. Some might say the recent bounce is to be expected after such a bad drop. Of course, this could be the start of a turnaround.
Xiezhong International 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. Some companies are willing to postpone profitability to grow revenue faster, but in that case one does expect good top-line growth.
In the last half decade, Xiezhong International Holdings saw its revenue increase by 25% per year. That's better than most loss-making companies. In contrast, the share price is has averaged a loss of 10% per year - that's quite disappointing. It's safe to say investor expectations are more grounded now. If you think the company can keep up its revenue growth, you'd have to consider the possibility that there's an opportunity here.
You can see how earnings and revenue have changed over time in the image below (click on the chart to see the exact values).
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. Dive deeper into the earnings by checking this interactive graph of Xiezhong International Holdings' earnings, revenue and cash flow.
A Different Perspective
Xiezhong International Holdings shareholders are down 11% for the year, but the market itself is up 35%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. However, the loss over the last year isn't as bad as the 10% 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 Xiezhong International Holdings is showing 3 warning signs in our investment analysis , and 2 of those are significant...
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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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