Hong Kong ChaoShang Group (HKG:2322) shareholders are up 27% this past week, but still in the red over the last three years

It's nice to see the Hong Kong ChaoShang Group Limited (HKG:2322) share price up 27% in a week. But that doesn't help the fact that the three year return is less impressive. After all, the share price is down 26% in the last three years, significantly under-performing the market.

The recent uptick of 27% could be a positive sign of things to come, so let's take a look at historical fundamentals.

See our latest analysis for Hong Kong ChaoShang Group

Because Hong Kong ChaoShang Group made a loss in the last twelve months, we think the market is probably more focussed on revenue and revenue growth, at least for now. When a company doesn't make profits, we'd generally hope to see good revenue growth. That's because fast revenue growth can be easily extrapolated to forecast profits, often of considerable size.

In the last three years Hong Kong ChaoShang Group saw its revenue shrink by 25% per year. That's definitely a weaker result than most pre-profit companies report. On the face of it we'd posit the share price fall of 8% compound, over three years is well justified by the fundamental deterioration. The key question now is whether the company has the capacity to fund itself to profitability, without more cash. Of course, it is possible for businesses to bounce back from a revenue drop - but we'd want to see that before getting interested.

You can see how earnings and revenue have changed over time in the image below (click on the chart to see the exact values).

Balance sheet strength is crucial. It might be well worthwhile taking a look at our free report on how its financial position has changed over time.

A Different Perspective

Investors in Hong Kong ChaoShang Group had a tough year, with a total loss of 9.5%, against a market gain of about 2.3%. 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. 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. To that end, you should be aware of the 1 warning sign we've spotted with Hong Kong ChaoShang Group .

For those who like to find winning investments this free list of undervalued 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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com