Tibet Water Resources (HKG:1115) shareholders are up 11% this past week, but still in the red over the last five years

While not a mind-blowing move, it is good to see that the Tibet Water Resources Ltd. (HKG:1115) share price has gained 23% in the last three months. But spare a thought for the long term holders, who have held the stock as it bled value over the last five years. In fact, the share price has tumbled down a mountain to land 86% lower after that period. 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. We really hope anyone holding through that price crash has a diversified portfolio. Even when you lose money, you don't have to lose the lesson.

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.

See our latest analysis for Tibet Water Resources

Tibet Water Resources isn't currently profitable, so most analysts would look to revenue growth to get an idea of how fast the underlying business is growing. Shareholders of unprofitable companies usually desire strong revenue growth. As you can imagine, fast revenue growth, when maintained, often leads to fast profit growth.

In the last five years Tibet Water Resources saw its revenue shrink by 23% per year. That's definitely a weaker result than most pre-profit companies report. So it's not that strange that the share price dropped 13% per year in that period. This kind of price performance makes us very wary, especially when combined with falling revenue. Of course, the poor performance could mean the market has been too severe selling down. That can happen.

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

Take a more thorough look at Tibet Water Resources' financial health with this free report on its balance sheet.

A Different Perspective

Investors in Tibet Water Resources had a tough year, with a total loss of 35%, against a market gain of about 10.0%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. Regrettably, last year's performance caps off a bad run, with the shareholders facing a total loss of 13% per year over five years. We realise that Baron Rothschild has said investors should "buy when there is blood on the streets", but we caution that investors should first be sure they are buying a high quality business. 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 4 warning signs for Tibet Water Resources (1 can't be ignored) that you should be aware of.

Of course Tibet Water Resources 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.