Dashan Education Holdings (HKG:9986) delivers shareholders splendid 22% CAGR over 5 years, surging 11% in the last week alone

When you buy a stock there is always a possibility that it could drop 100%. But when you pick a company that is really flourishing, you can make more than 100%. One great example is Dashan Education Holdings Limited (HKG:9986) which saw its share price drive 171% higher over five years. On top of that, the share price is up 56% in about a quarter.

Since it's been a strong week for Dashan Education Holdings shareholders, let's have a look at trend of the longer term fundamentals.

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Given that Dashan Education 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. When a company doesn't make profits, we'd generally hope to see good 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.

In the last 5 years Dashan Education Holdings saw its revenue shrink by 39% per year. Given that scenario, we wouldn't have expected the share price to rise 22% per year, but that's what it did. 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 image below shows how earnings and revenue have tracked over time (if you click on the image you can see greater detail).

It's probably worth noting we've seen significant insider buying in the last quarter, which we consider a positive. That said, we think earnings and revenue growth trends are even more important factors to consider. It might be well worthwhile taking a look at our free report on Dashan Education Holdings' earnings, revenue and cash flow.

A Different Perspective

Investors in Dashan Education Holdings had a tough year, with a total loss of 24%, against a market gain of about 41%. 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. On the bright side, long term shareholders have made money, with a gain of 22% per year over half a decade. If the fundamental data continues to indicate long term sustainable growth, the current sell-off could be an opportunity worth considering. 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. Take risks, for example - Dashan Education Holdings has 3 warning signs (and 1 which is a bit concerning) we think you should know about.

Dashan Education Holdings is not the only stock insiders are buying. So take a peek at this free list of small cap companies at attractive valuations which insiders have been buying.

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.