The five-year loss for Fosun Tourism Group (HKG:1992) shareholders likely driven by its shrinking earnings

This week we saw the Fosun Tourism Group (HKG:1992) share price climb by 13%. But don't envy holders -- looking back over 5 years the returns have been really bad. Indeed, the share price is down 67% in the period. So is the recent increase sufficient to restore confidence in the stock? Not yet. But it could be that the fall was overdone.

On a more encouraging note the company has added HK$560m to its market cap in just the last 7 days, so let's see if we can determine what's driven the five-year loss for shareholders.

View our latest analysis for Fosun Tourism Group

In his essay The Superinvestors of Graham-and-Doddsville Warren Buffett described how share prices do not always rationally reflect the value of a business. One imperfect but simple way to consider how the market perception of a company has shifted is to compare the change in the earnings per share (EPS) with the share price movement.

During five years of share price growth, Fosun Tourism Group moved from a loss to profitability. That would generally be considered a positive, so we are surprised to see the share price is down. Other metrics might give us a better handle on how its value is changing over time.

The revenue fall of 2.3% per year for five years is neither good nor terrible. But if the market expected durable top line growth, then that could explain the share price weakness.

You can see below how earnings and revenue have changed over time (discover the exact values by clicking on the image).

We know that Fosun Tourism Group has improved its bottom line over the last three years, but what does the future have in store? It might be well worthwhile taking a look at our free report on how its financial position has changed over time.

A Different Perspective

While the broader market gained around 6.8% in the last year, Fosun Tourism Group shareholders lost 46%. 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. Regrettably, last year's performance caps off a bad run, with the shareholders facing a total loss of 11% per year over five years. We realise that Baron Rothschild has said investors should "buy when there is blood on the streets", but we caution that investors should first be sure they are buying a high quality business. 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. Take risks, for example - Fosun Tourism Group has 1 warning sign we think you should be aware of.

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.

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