Further weakness as Nine Dragons Paper (Holdings) (HKG:2689) drops 15% this week, taking three-year losses to 66%

If you love investing in stocks you're bound to buy some losers. Long term Nine Dragons Paper (Holdings) Limited (HKG:2689) shareholders know that all too well, since the share price is down considerably over three years. Regrettably, they have had to cope with a 69% drop in the share price over that period. The more recent news is of little comfort, with the share price down 27% in a year. And the share price decline continued over the last week, dropping some 15%.

Since Nine Dragons Paper (Holdings) has shed HK$3.0b from its value in the past 7 days, let's see if the longer term decline has been driven by the business' economics.

View our latest analysis for Nine Dragons Paper (Holdings)

Given that Nine Dragons Paper (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. 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 three years Nine Dragons Paper (Holdings) saw its revenue shrink by 1.1% per year. That's not what investors generally want to see. With revenue in decline, and profit but a dream, we can understand why the share price has been declining at 19% per year. Of course, it's the future that will determine whether today's price is a good one. We don't generally like to own companies that lose money and can't grow revenues. But any company is worth looking at when it makes a maiden profit.

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

Nine Dragons Paper (Holdings) is well known by investors, and plenty of clever analysts have tried to predict the future profit levels. So it makes a lot of sense to check out what analysts think Nine Dragons Paper (Holdings) will earn in the future (free analyst consensus estimates)

What About The Total Shareholder Return (TSR)?

We've already covered Nine Dragons Paper (Holdings)'s share price action, but we should also mention its total shareholder return (TSR). The TSR is a return calculation that accounts for the value of cash dividends (assuming that any dividend received was reinvested) and the calculated value of any discounted capital raisings and spin-offs. Dividends have been really beneficial for Nine Dragons Paper (Holdings) shareholders, and that cash payout explains why its total shareholder loss of 66%, over the last 3 years, isn't as bad as the share price return.

A Different Perspective

While the broader market gained around 4.4% in the last year, Nine Dragons Paper (Holdings) shareholders lost 27%. 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 6% 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. Case in point: We've spotted 1 warning sign for Nine Dragons Paper (Holdings) you should be aware of.

But note: Nine Dragons Paper (Holdings) may not be the best stock to buy. So take a peek at this free list of interesting companies with past earnings growth (and further growth forecast).

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.