This week we saw the Central Wealth Group Holdings Limited (HKG:139) share price climb by 22%. But will that heal all the wounds inflicted over 5 years of declines? Unlikely. Five years have seen the share price descend precipitously, down a full 74%. It's true that the recent bounce could signal the company is turning over a new leaf, but we are not so sure. The million dollar question is whether the company can justify a long term recovery.
Central Wealth Group Holdings isn't currently profitable, so most analysts would look to revenue growth to get an idea of how fast the underlying business is growing. When a company doesn't make profits, we'd generally expect to see good revenue growth. Some companies are willing to postpone profitability to grow revenue faster, but in that case one does expect good top-line growth.
In the last half decade, Central Wealth Group Holdings saw its revenue increase by 46% per year. That's better than most loss-making companies. So on the face of it we're really surprised to see the share price has averaged a fall of 23% each year, in the same time period. You'd have to assume the market is worried that profits won't come soon enough. We'd recommend carefully checking for indications of future growth - and balance sheet threats - before considering a purchase.
You can see how earnings and revenue have changed over time in the image below (click on the chart to see the exact values).
We consider it positive that insiders have made significant purchases in the last year. Even so, future earnings will be far more important to whether current shareholders make money. It might be well worthwhile taking a look at our free report on Central Wealth Group Holdings's earnings, revenue and cash flow.
A Different Perspective
It's nice to see that Central Wealth Group Holdings shareholders have received a total shareholder return of 20% over the last year. Notably the five-year annualised TSR loss of 23% per year compares very unfavourably with the recent share price performance. The long term loss makes us cautious, but the short term TSR gain certainly hints at a brighter future. 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. Case in point: We've spotted 3 warning signs for Central Wealth Group Holdings you should be aware of.
Central Wealth Group Holdings is not the only stock that insiders are buying. For those who like to find winning investments this free list of growing companies with recent insider purchasing, could be just the ticket.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on HK exchanges.
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