Haichang Ocean Park Holdings' (HKG:2255) growing losses don't faze investors as the stock spikes 11% this past week

When we invest, we're generally looking for stocks that outperform the market average. And while active stock picking involves risks (and requires diversification) it can also provide excess returns. To wit, the Haichang Ocean Park Holdings share price has climbed 62% in five years, easily topping the market return of 4.8% (ignoring dividends).

The past week has proven to be lucrative for Haichang Ocean Park Holdings investors, so let's see if fundamentals drove the company's five-year performance.

See our latest analysis for Haichang Ocean Park Holdings

Given that Haichang Ocean Park Holdings didn't make a profit in the last twelve months, we'll focus on revenue growth to form a quick view of its business development. Generally speaking, companies without profits are expected to grow revenue every year, and at a good clip. 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 5 years Haichang Ocean Park Holdings saw its revenue shrink by 10% per year. Even though revenue hasn't increased, the stock actually gained 10%, per year, during the same period. To us that suggests that there probably isn't a lot of correlation between the past revenue performance and the share price, but a closer look at analyst forecasts and the bottom line may well explain a lot.

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

You can see how its balance sheet has strengthened (or weakened) over time in this free interactive graphic.

A Different Perspective

While the broader market gained around 33% in the last year, Haichang Ocean Park Holdings shareholders lost 20%. 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 10%, 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 Haichang Ocean Park Holdings better, we need to consider many other factors. To that end, you should be aware of the 1 warning sign we've spotted with Haichang Ocean Park Holdings .

Of course Haichang Ocean Park Holdings may not be the best stock to buy. So you may wish to see this free collection of growth stocks.

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.