Should Chong Kin Group Holdings (HKG:1609) Be Disappointed With Their 65% Profit?

By buying an index fund, investors can approximate the average market return. But if you buy good businesses at attractive prices, your portfolio returns could exceed the average market return. For example, the Chong Kin Group Holdings Limited (HKG:1609) share price is up 65% in the last three years, clearly besting the market decline of around 14% (not including dividends). On the other hand, the returns haven't been quite so good recently, with shareholders up just 38%.

View our latest analysis for Chong Kin Group Holdings

Chong Kin Group Holdings isn't currently profitable, so most analysts would look to revenue growth to get an idea of how fast the underlying business is growing. Generally speaking, companies without profits are expected to grow revenue every year, and at a good clip. That's because fast revenue growth can be easily extrapolated to forecast profits, often of considerable size.

In the last 3 years Chong Kin Group Holdings saw its revenue grow at 0.2% per year. Considering the company is losing money, we think that rate of revenue growth is uninspiring. In that time the share price is up 18% per year, which is not unreasonable given the revenue gorwth. Ultimately, the important thing is whether the company is trending to profitability. In this sort of situation it can be worth putting the stock on your watchlist. If it can become profitable, then even moderate revenue growth could grow profits quickly.

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 good to see that there was some significant insider buying in the last three months. That's a positive. That said, we think earnings and revenue growth trends are even more important factors to consider. Dive deeper into the earnings by checking this interactive graph of Chong Kin Group Holdings' earnings, revenue and cash flow.

A Different Perspective

We're pleased to report that Chong Kin Group Holdings rewarded shareholders with a total shareholder return of 38% over the last year. That gain actually surpasses the 18% TSR it generated (per year) over three years. Given the track record of solid returns over varying time frames, it might be worth putting Chong Kin Group Holdings on your watchlist. 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. For example, we've discovered 4 warning signs for Chong Kin Group Holdings (2 shouldn't be ignored!) that you should be aware of before investing here.

If you like to buy stocks alongside management, then you might just love this free list of companies. (Hint: insiders have been buying them).

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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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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