Investors ignore increasing losses at Imperium Technology Group (HKG:776) as stock jumps 17% this past week

Imperium Technology Group Limited (HKG:776) shareholders might be rather concerned because the share price has dropped 46% in the last month. But that doesn't change the fact that shareholders have received really good returns over the last five years. In fact, the share price is 181% higher today. Generally speaking the long term returns will give you a better idea of business quality than short periods can. Only time will tell if there is still too much optimism currently reflected in the share price. While the returns over the last 5 years have been good, we do feel sorry for those shareholders who haven't held shares that long, because the share price is down 76% in the last three years.

Since the stock has added HK$202m to its market cap in the past week alone, let's see if underlying performance has been driving long-term returns.

See our latest analysis for Imperium Technology Group

Imperium Technology Group 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. Generally speaking, companies without profits are expected to grow revenue every year, and at a good clip. That's because fast revenue growth can be easily extrapolated to forecast profits, often of considerable size.

In the last 5 years Imperium Technology Group saw its revenue shrink by 22% per year. On the other hand, the share price done the opposite, gaining 23%, compound, each year. It just goes to show tht the market is forward looking, and it's not always easy to predict the future based on past trends. Still, this situation makes us a little wary of the stock.

The company's revenue and earnings (over time) are depicted in the image below (click to see the exact numbers).

Take a more thorough look at Imperium Technology Group's financial health with this free report on its balance sheet.

A Different Perspective

While the broader market gained around 25% in the last year, Imperium Technology Group shareholders lost 33%. 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 23%, each year, over five years. It could be that the recent sell-off is an opportunity, so it may be worth checking the fundamental data for signs of a long term growth trend. It's always interesting to track share price performance over the longer term. But to understand Imperium Technology Group better, we need to consider many other factors. For example, we've discovered 4 warning signs for Imperium Technology Group (3 are a bit concerning!) that you should be aware of before investing here.

If you like to buy stocks alongside management, then you might just love this free list of companies. (Hint: many of them are unnoticed AND have attractive valuation).

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.