Wison Engineering Services (HKG:2236) adds HK$77m to market cap in the past 7 days, though investors from five years ago are still down 79%

This week we saw the Wison Engineering Services Co. Ltd. (HKG:2236) share price climb by 12%. But that doesn't change the fact that the returns over the last half decade have been stomach churning. Five years have seen the share price descend precipitously, down a full 80%. So we don't gain too much confidence from the recent recovery. The important question is if the business itself justifies a higher share price in the long term.

Although the past week has been more reassuring for shareholders, they're still in the red over the last five years, so let's see if the underlying business has been responsible for the decline.

Check out our latest analysis for Wison Engineering Services

Because Wison Engineering Services made a loss in the last twelve months, we think the market is probably more focussed on revenue and revenue growth, at least for now. Shareholders of unprofitable companies usually desire strong revenue growth. As you can imagine, fast revenue growth, when maintained, often leads to fast profit growth.

Over half a decade Wison Engineering Services reduced its trailing twelve month revenue by 1.9% for each year. That's not what investors generally want to see. The share price fall of 12% (per year, over five years) is a stern reminder that money-losing companies are expected to grow revenue. It takes a certain kind of mental fortitude (or recklessness) to buy shares in a company that loses money and doesn't grow revenue. That is not really what the successful investors we know aim for.

The graphic below depicts how earnings and revenue have changed over time (unveil the exact values by clicking on the image).

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 Wison Engineering Services' earnings, revenue and cash flow.

A Different Perspective

Investors in Wison Engineering Services had a tough year, with a total loss of 43%, against a market gain of about 15%. 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. Unfortunately, last year's performance may indicate unresolved challenges, given that it was worse than the annualised loss of 12% over the last half decade. Generally speaking long term share price weakness can be a bad sign, though contrarian investors might want to research the stock in hope of a turnaround. 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. To that end, you should learn about the 2 warning signs we've spotted with Wison Engineering Services (including 1 which is a bit unpleasant) .

Wison Engineering Services 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.