Investors might be losing patience for Sky Light Holdings' (HKG:3882) increasing losses, as stock sheds 10% over the past week

The Sky Light Holdings Limited (HKG:3882) share price has had a bad week, falling 10%. But over the last three years the stock has shone bright like a diamond. Indeed, the share price is up a whopping 553% in that time. So you might argue that the recent reduction in the share price is unremarkable in light of the longer term performance. The thing to consider is whether there is still too much elation around the company's prospects. Anyone who held for that rewarding ride would probably be keen to talk about it.

While the stock has fallen 10% this week, it's worth focusing on the longer term and seeing if the stocks historical returns have been driven by the underlying fundamentals.

View our latest analysis for Sky Light Holdings

Because Sky Light 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. Some companies are willing to postpone profitability to grow revenue faster, but in that case one would hope for good top-line growth to make up for the lack of earnings.

In the last 3 years Sky Light Holdings saw its revenue shrink by 32% per year. This is in stark contrast to the strong share price growth of 87%, compound, per year. This clear lack of correlation between revenue and share price is surprising to see in a money losing company. At the risk of upsetting holders, this does suggest that hope for a better future is playing a significant role in the share price action.

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

It's probably worth noting that the CEO is paid less than the median at similar sized companies. But while CEO remuneration is always worth checking, the really important question is whether the company can grow earnings going forward. It might be well worthwhile taking a look at our free report on Sky Light Holdings' earnings, revenue and cash flow.

A Different Perspective

While the broader market gained around 33% in the last year, Sky Light Holdings shareholders lost 5.0%. 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 29%, 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 2 warning signs we've spotted with Sky Light Holdings .

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.

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

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.