Hengtai Securities' (HKG:1476) growing losses don't faze investors as the stock ascends 9.1% this past week

Generally speaking the aim of active stock picking is to find companies that provide returns that are superior to the market average. Buying under-rated businesses is one path to excess returns. To wit, the Hengtai Securities share price has climbed 32% in five years, easily topping the market decline of 18% (ignoring dividends).

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

View our latest analysis for Hengtai Securities

Hengtai Securities wasn't profitable in the last twelve months, it is unlikely we'll see a strong correlation between its share price and its earnings per share (EPS). Arguably revenue is our next best option. Generally speaking, companies without profits are expected to grow revenue every year, and at a good clip. As you can imagine, fast revenue growth, when maintained, often leads to fast profit growth.

For the last half decade, Hengtai Securities can boast revenue growth at a rate of 1.8% per year. Put simply, that growth rate fails to impress. The modest growth is probably broadly reflected in the share price, which is up 6%, per year over 5 years. The business could be one worth watching but we generally prefer faster revenue growth.

The image below shows how earnings and revenue have tracked over time (if you click on the image you can see greater detail).

Balance sheet strength is crucial. It might be well worthwhile taking a look at our free report on how its financial position has changed over time.

A Different Perspective

We regret to report that Hengtai Securities shareholders are down 24% for the year. Unfortunately, that's worse than the broader market decline of 7.4%. Having said that, it's inevitable that some stocks will be oversold in a falling market. The key is to keep your eyes on the fundamental developments. On the bright side, long term shareholders have made money, with a gain of 6% per year over half a decade. 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. 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. For instance, we've identified 2 warning signs for Hengtai Securities (1 is a bit concerning) that you should be aware of.

Of course Hengtai Securities 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.