Huabao International Holdings (HKG:336) stock falls 4.7% in past week as three-year earnings and shareholder returns continue downward trend

While it may not be enough for some shareholders, we think it is good to see the Huabao International Holdings Limited (HKG:336) share price up 15% in a single quarter. But that doesn't change the fact that the returns over the last three years have been stomach churning. Indeed, the share price is down a whopping 79% in the last three years. So it's about time shareholders saw some gains. The thing to think about is whether the business has really turned around.

Since Huabao International Holdings has shed HK$420m from its value in the past 7 days, let's see if the longer term decline has been driven by the business' economics.

Check out our latest analysis for Huabao International Holdings

While markets are a powerful pricing mechanism, share prices reflect investor sentiment, not just underlying business performance. One imperfect but simple way to consider how the market perception of a company has shifted is to compare the change in the earnings per share (EPS) with the share price movement.

Huabao International Holdings became profitable within the last five years. That would generally be considered a positive, so we are surprised to see the share price is down. So it's worth looking at other metrics to try to understand the share price move.

Arguably the revenue decline of 4.6% per year has people thinking Huabao International Holdings is shrinking. And that's not surprising, since it seems unlikely that EPS growth can continue for long in the absence of revenue growth.

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

Take a more thorough look at Huabao International Holdings' financial health with this free report on its balance sheet.

A Different Perspective

Investors in Huabao International Holdings had a tough year, with a total loss of 15% (including dividends), against a market gain of about 7.7%. 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 1.7% over the last half decade. 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. It's always interesting to track share price performance over the longer term. But to understand Huabao International Holdings better, we need to consider many other factors. For instance, we've identified 1 warning sign for Huabao International Holdings that you should be aware of.

If you like to buy stocks alongside management, then you might just love this free list of companies. (Hint: many of them are unnoticed AND have attractive valuation).

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.