Lotus Horizon Holdings (HKG:6063) spikes 12% this week, taking three-year gains to 132%

It might seem bad, but the worst that can happen when you buy a stock (without leverage) is that its share price goes to zero. But if you buy shares in a really great company, you can more than double your money. For instance the Lotus Horizon Holdings Limited (HKG:6063) share price is 132% higher than it was three years ago. Most would be happy with that. Also pleasing for shareholders was the 33% gain in the last three months. This could be related to the recent financial results, released recently - you can catch up on the most recent data by reading our company report.

On the back of a solid 7-day performance, let's check what role the company's fundamentals have played in driving long term shareholder returns.

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We don't think that Lotus Horizon Holdings' modest trailing twelve month profit has the market's full attention at the moment. We think revenue is probably a better guide. As a general rule, we think this kind of company is more comparable to loss-making stocks, since the actual profit is so low. It would be hard to believe in a more profitable future without growing revenues.

Lotus Horizon Holdings' revenue trended up 11% each year over three years. That's a very respectable growth rate. Broadly speaking, this solid progress may well be reflected by the healthy share price gain of 32% per year over three years. It's hard to value pre-profit businesses, but it seems like the market has become a lot more optimistic about this one! It would be worth thinking about when profits will flow, since that milestone will attract more attention.

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

If you are thinking of buying or selling Lotus Horizon Holdings stock, you should check out this FREE detailed report on its balance sheet.

A Different Perspective

While the broader market gained around 41% in the last year, Lotus Horizon Holdings shareholders lost 3.2%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. Longer term investors wouldn't be so upset, since they would have made 14%, 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 Lotus Horizon Holdings better, we need to consider many other factors. Like risks, for instance. Every company has them, and we've spotted 4 warning signs for Lotus Horizon Holdings (of which 1 is a bit unpleasant!) you should know about.

We will like Lotus Horizon Holdings better if we see some big insider buys. While we wait, check out this free list of undervalued stocks (mostly small caps) with considerable, recent, insider buying.

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.