The three-year decline in earnings for WebX International Holdings HKG:8521) isn't encouraging, but shareholders are still up 509% over that period

It's been a soft week for WebX International Holdings Company Limited (HKG:8521) shares, which are down 11%. But over the last three years the stock has shone bright like a diamond. The longer term view reveals that the share price is up 509% in that period. So you might argue that the recent reduction in the share price is unremarkable in light of the longer term performance. The share price action could signify that the business itself is dramatically improved, in that time. It really delights us to see such great share price performance for investors.

Although WebX International Holdings has shed HK$58m from its market cap this week, let's take a look at its longer term fundamental trends and see if they've driven returns.

See our latest analysis for WebX International Holdings

We don't think that WebX International 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. For shareholders to have confidence a company will grow profits significantly, it must grow revenue.

In the last 3 years WebX International Holdings saw its revenue shrink by 4.4% per year. So it's pretty amazing to see the stock price has zoomed up 83% per year in that time. There can be no doubt this kind of decoupling of revenue growth and share price growth is unusual to see in loss making companies. So there is a serious possibility that some holders are counting their chickens before they hatch.

The graphic below depicts how earnings and revenue have changed over time (unveil the exact values by clicking on the image).

Take a more thorough look at WebX International Holdings' financial health with this free report on its balance sheet.

A Different Perspective

It's nice to see that WebX International Holdings shareholders have received a total shareholder return of 217% over the last year. Since the one-year TSR is better than the five-year TSR (the latter coming in at 13% per year), it would seem that the stock's performance has improved in recent times. In the best case scenario, this may hint at some real business momentum, implying that now could be a great time to delve deeper. 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 WebX International Holdings (of which 2 can't be ignored!) you should know about.

If you would prefer to check out another company -- one with potentially superior financials -- then do not miss this free list of companies that have proven they can grow earnings.

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.