Did CPM Group's (HKG:1932) Share Price Deserve to Gain 20%?

We believe investing is smart because history shows that stock markets go higher in the long term. But not every stock you buy will perform as well as the overall market. For example, the CPM Group Limited (HKG:1932), share price is up over the last year, but its gain of 20% trails the market return. In contrast, the longer term returns are negative, since the share price is 9.4% lower than it was three years ago.

Check out our latest analysis for CPM Group

Given that CPM Group 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. When a company doesn't make profits, we'd generally expect to see good revenue growth. Some companies are willing to postpone profitability to grow revenue faster, but in that case one does expect good top-line growth.

In the last year CPM Group saw its revenue grow by 0.4%. That's not a very high growth rate considering it doesn't make profits. It's probably fair to say that the modest growth is reflected in the modest share price gain of 20%. It might be worth thinking about how long it will take the company to turn a profit.

The company's revenue and earnings (over time) are depicted in the image below (click to see the exact numbers).

You can see how its balance sheet has strengthened (or weakened) over time in this free interactive graphic.

What About Dividends?

It is important to consider the total shareholder return, as well as the share price return, for any given stock. The TSR incorporates the value of any spin-offs or discounted capital raisings, along with any dividends, based on the assumption that the dividends are reinvested. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. In the case of CPM Group, it has a TSR of 23% for the last year. That exceeds its share price return that we previously mentioned. And there's no prize for guessing that the dividend payments largely explain the divergence!

A Different Perspective

Over the last year CPM Group shareholders have received a TSR of 23%. Unfortunately this falls short of the market return of around 28%. The silver lining is that the recent rise is far preferable to the annual loss of 2.4% that shareholders have suffered over the last three years. It could well be that the business is stabilizing. I find it very interesting to look at share price over the long term as a proxy for business performance. But to truly gain insight, we need to consider other information, too. Take risks, for example - CPM Group has 3 warning signs (and 1 which is a bit unpleasant) we think you should know about.

Of course, you might find a fantastic investment by looking elsewhere. So take a peek at this free list of companies we expect will grow earnings.

Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on HK exchanges.

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This article by Simply Wall St is general in nature. 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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