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While it may not be enough for some shareholders, we think it is good to see the TANSH Global Food Group Co., Ltd (HKG:3666) share price up 19% in a single quarter. But that doesn’t change the fact that the returns over the last half decade have been stomach churning. In fact, the share price has tumbled down a mountain to land 74% lower after that period. It’s true that the recent bounce could signal the company is turning over a new leaf, but we are not so sure. The fundamental business performance will ultimately determine if the turnaround can be sustained.
Because TANSH Global Food Group is loss-making, we think the market is probably more focussed on revenue and revenue growth, at least for now. Shareholders of unprofitable companies usually expect strong revenue growth. That’s because it’s hard to be confident a company will be sustainable if revenue growth is negligible, and it never makes a profit.
Over five years, TANSH Global Food Group grew its revenue at 2.7% per year. That’s far from impressive given all the money it is losing. It’s not so sure that share price crash of 24% per year is completely deserved, but the market is doubtless disappointed. We’d be pretty cautious about this one, although the sell-off may be too severe. We’d recommend focussing any further research on the likelihood of profitability in the foreseeable future, given the muted revenue growth.
The graphic below shows how revenue and earnings have changed as management guided the business forward. If you want to see cashflow, you can click on the chart.
We consider it positive that insiders have made significant purchases in the last year. Having said that, most people consider earnings and revenue growth trends to be a more meaningful guide to the business. Dive deeper into the earnings by checking this interactive graph of TANSH Global Food Group’s earnings, revenue and cash flow.
What about the Total Shareholder Return (TSR)?
We’d be remiss not to mention the difference between TANSH Global Food Group’s total shareholder return (TSR) and its share price return. Arguably the TSR is a more complete return calculation because it accounts for the value of dividends (as if they were reinvested), along with the hypothetical value of any discounted capital that have been offered to shareholders. Dividends have been really beneficial for TANSH Global Food Group shareholders, and that cash payout explains why its total shareholder loss of 73%, over the last 5 years, isn’t as bad as the share price return.
A Different Perspective
We regret to report that TANSH Global Food Group shareholders are down 21% for the year (even including dividends). Unfortunately, that’s worse than the broader market decline of 10%. However, it could simply be that the share price has been impacted by broader market jitters. It might be worth keeping an eye on the fundamentals, in case there’s a good opportunity. However, the loss over the last year isn’t as bad as the 23% per annum loss investors have suffered over the last half decade. We’d need to see some sustained improvements in the key metrics before we could muster much enthusiasm. It is all well and good that insiders have been buying shares, but we suggest you check here to see what price insiders were buying at.
TANSH Global Food Group is not the only stock insiders are buying. So take a peek at this free list of growing companies with insider buying.Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on HK exchanges.
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.
If you spot an error that warrants correction, please contact the editor at firstname.lastname@example.org. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned. Thank you for reading.