Further weakness as China Biotech Services Holdings (HKG:8037) drops 11% this week, taking five-year losses to 63%

It is doubtless a positive to see that the China Biotech Services Holdings Limited (HKG:8037) share price has gained some 42% in the last three months. But that can't change the reality that over the longer term (five years), the returns have been really quite dismal. Indeed, the share price is down 63% in the period. So we're hesitant to put much weight behind the short term increase. Of course, this could be the start of a turnaround.

After losing 11% this past week, it's worth investigating the company's fundamentals to see what we can infer from past performance.

Check out our latest analysis for China Biotech Services Holdings

Given that China Biotech Services 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. Generally speaking, companies without profits are expected to grow revenue every year, and at a good clip. Some companies are willing to postpone profitability to grow revenue faster, but in that case one would hope for good top-line growth to make up for the lack of earnings.

In the last half decade, China Biotech Services Holdings saw its revenue increase by 21% per year. That's well above most other pre-profit companies. Unfortunately for shareholders the share price has dropped 10% per year - disappointing considering the growth. This could mean high expectations have been tempered, potentially because investors are looking to the bottom line. Given the revenue growth we'd consider the stock to be quite an interesting prospect if the company has a clear path to profitability.

You can see below how earnings and revenue have changed over time (discover the exact values by clicking on the image).

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

While the broader market gained around 24% in the last year, China Biotech Services Holdings shareholders lost 30%. 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 10% 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. To that end, you should learn about the 2 warning signs we've spotted with China Biotech Services Holdings (including 1 which is concerning) .

If you are like me, then you will not want to miss this free list of undervalued small caps that insiders are 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.