The most you can lose on any stock (assuming you don't use leverage) is 100% of your money. But when you pick a company that is really flourishing, you can make more than 100%. For instance the Touyun Biotech Group Limited (HKG:1332) share price is 297% higher than it was three years ago. How nice for those who held the stock! It's even up 11% in the last week.
After a strong gain in the past week, it's worth seeing if longer term returns have been driven by improving fundamentals.
Touyun Biotech Group 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. Shareholders of unprofitable companies usually expect strong revenue growth. That's because it's hard to be confident a company will be sustainable if revenue growth is negligible, and it never makes a profit.
In the last 3 years Touyun Biotech Group saw its revenue shrink by 19% per year. So we wouldn't have expected the share price to gain 58% per year, but it has. It's a good reminder that expectations about the future, not the past history, always impact share prices.
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. Dive deeper into the earnings by checking this interactive graph of Touyun Biotech Group's earnings, revenue and cash flow.
A Different Perspective
It's good to see that Touyun Biotech Group has rewarded shareholders with a total shareholder return of 82% in the last twelve months. There's no doubt those recent returns are much better than the TSR loss of 4% per year over five years. We generally put more weight on the long term performance over the short term, but the recent improvement could hint at a (positive) inflection point within the business. It's always interesting to track share price performance over the longer term. But to understand Touyun Biotech Group better, we need to consider many other factors. Consider for instance, the ever-present spectre of investment risk. We've identified 1 warning sign with Touyun Biotech Group , and understanding them should be part of your investment process.
Touyun Biotech Group 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.
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.
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