Changsha Broad Homes Industrial Group (HKG:2163) adds HK$185m to market cap in the past 7 days, though investors from three years ago are still down 90%

Changsha Broad Homes Industrial Group Co., Ltd. (HKG:2163) has rebounded strongly over the last week, with the share price soaring 51%. But that doesn't change the fact that the returns over the last three years have been stomach churning. To wit, the share price sky-dived 90% in that time. So it sure is nice to see a bit of an improvement. Of course the real question is whether the business can sustain a turnaround. We really hope anyone holding through that price crash has a diversified portfolio. Even when you lose money, you don't have to lose the lesson.

While the last three years has been tough for Changsha Broad Homes Industrial Group shareholders, this past week has shown signs of promise. So let's look at the longer term fundamentals and see if they've been the driver of the negative returns.

See our latest analysis for Changsha Broad Homes Industrial Group

Changsha Broad Homes Industrial Group 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.

Over the last three years, Changsha Broad Homes Industrial Group's revenue dropped 13% per year. That's not what investors generally want to see. Having said that the 24% annualized share price decline highlights the risk of investing in unprofitable companies. We're generally averse to companies with declining revenues, but we're not alone in that. Don't let a share price decline ruin your calm. You make better decisions when you're calm.

The image below shows how earnings and revenue have tracked over time (if you click on the image you can see greater detail).

We like that insiders have been buying shares in the last twelve months. Having said that, most people consider earnings and revenue growth trends to be a more meaningful guide to the business. This free interactive report on Changsha Broad Homes Industrial Group's earnings, revenue and cash flow is a great place to start, if you want to investigate the stock further.

A Different Perspective

Changsha Broad Homes Industrial Group shareholders are down 58% for the year, but the market itself is up 22%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. Regrettably, last year's performance caps off a bad run, with the shareholders facing a total loss of 13% per year over five years. Generally speaking long term share price weakness can be a bad sign, though contrarian investors might want to research the stock in hope of a turnaround. While it is well worth considering the different impacts that market conditions can have on the share price, there are other factors that are even more important. Case in point: We've spotted 3 warning signs for Changsha Broad Homes Industrial Group you should be aware of, and 2 of them can't be ignored.

Changsha Broad Homes Industrial Group is not the only stock that insiders are buying. For those who like to find lesser know companies this free list of growing companies with recent insider purchasing, could be just the ticket.

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