Increasing losses over three years doesn't faze WLS Holdings (HKG:8021) investors as stock hikes 12% this past week

Over the last month the WLS Holdings Limited (HKG:8021) has been much stronger than before, rebounding by 32%. But that doesn't change the fact that the returns over the last three years have been less than pleasing. In fact, the share price is down 42% in the last three years, falling well short of the market return.

While the stock has risen 12% in the past week but long term shareholders are still in the red, let's see what the fundamentals can tell us.

Check out our latest analysis for WLS Holdings

Because WLS Holdings 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. Shareholders of unprofitable companies usually desire strong revenue growth. That's because it's hard to be confident a company will be sustainable if revenue growth is negligible, and it never makes a profit.

In the last three years WLS Holdings saw its revenue shrink by 21% per year. That means its revenue trend is very weak compared to other loss making companies. On the face of it we'd posit the share price fall of 12% 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.

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

This free interactive report on WLS Holdings' balance sheet strength is a great place to start, if you want to investigate the stock further.

A Different Perspective

WLS Holdings shareholders are down 19% for the year, but the market itself is up 33%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. On the bright side, long term shareholders have made money, with a gain of 2% per year over half a decade. If the fundamental data continues to indicate long term sustainable growth, the current sell-off could be an opportunity worth considering. 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. Like risks, for instance. Every company has them, and we've spotted 3 warning signs for WLS Holdings (of which 1 doesn't sit too well with us!) you should know about.

We will like WLS 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.