Shareholders have faith in loss-making Cornerstone Technologies Holdings (HKG:8391) as stock climbs 15% in past week, taking five-year gain to 90%

Stock pickers are generally looking for stocks that will outperform the broader market. And while active stock picking involves risks (and requires diversification) it can also provide excess returns. To wit, the Cornerstone Technologies Holdings share price has climbed 90% in five years, easily topping the market return of 8.1% (ignoring dividends). However, more recent returns haven't been as impressive as that, with the stock returning just 8.3% in the last year.

Since the stock has added HK$95m to its market cap in the past week alone, let's see if underlying performance has been driving long-term returns.

Check out our latest analysis for Cornerstone Technologies Holdings

Cornerstone Technologies Holdings wasn't profitable in the last twelve months, it is unlikely we'll see a strong correlation between its share price and its earnings per share (EPS). Arguably revenue is our next best option. When a company doesn't make profits, we'd generally hope to see good revenue growth. As you can imagine, fast revenue growth, when maintained, often leads to fast profit growth.

For the last half decade, Cornerstone Technologies Holdings can boast revenue growth at a rate of 3.4% per year. That's not a very high growth rate considering the bottom line. While it's hard to say just how much value the company added over five years, the annualised share price gain of 14% seems about right. The business could be one worth watching but we generally prefer faster revenue growth.

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

We consider it positive that insiders have made significant purchases in the last year. Having said that, most people consider earnings and revenue growth trends to be a more meaningful guide to the business. It might be well worthwhile taking a look at our free report on Cornerstone Technologies Holdings' earnings, revenue and cash flow.

A Different Perspective

Cornerstone Technologies Holdings shareholders gained a total return of 8.3% during the year. But that return falls short of the market. If we look back over five years, the returns are even better, coming in at 14% per year for five years. It's quite possible the business continues to execute with prowess, even as the share price gains are slowing. 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. Even so, be aware that Cornerstone Technologies Holdings is showing 3 warning signs in our investment analysis , and 1 of those is significant...

Cornerstone Technologies Holdings is not the only stock insiders are buying. So take a peek at this free list of small cap companies at attractive valuations which insiders have been 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.