Investors ignore increasing losses at Universe Entertainment and Culture Group (HKG:1046) as stock jumps 49% this past week

When we invest, we're generally looking for stocks that outperform the market average. And in our experience, buying the right stocks can give your wealth a significant boost. To wit, the Universe Entertainment and Culture Group share price has climbed 73% in five years, easily topping the market return of 8.7% (ignoring dividends). However, more recent returns haven't been as impressive as that, with the stock returning just 28% in the last year.

After a strong gain in the past week, it's worth seeing if longer term returns have been driven by improving fundamentals.

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Universe Entertainment and Culture 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. Generally speaking, companies without profits are expected to grow revenue every year, and at a good clip. That's because fast revenue growth can be easily extrapolated to forecast profits, often of considerable size.

For the last half decade, Universe Entertainment and Culture Group can boast revenue growth at a rate of 2.2% per year. That's not a very high growth rate considering the bottom line. The modest growth is probably broadly reflected in the share price, which is up 12%, per year over 5 years. We'd be looking for the underlying business to grow revenue a bit faster.

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

Take a more thorough look at Universe Entertainment and Culture Group's financial health with this free report on its balance sheet.

A Different Perspective

Universe Entertainment and Culture Group provided a TSR of 28% over the last twelve months. Unfortunately this falls short of the market return. The silver lining is that the gain was actually better than the average annual return of 12% per year over five year. This could indicate that the company is winning over new investors, as it pursues its strategy. 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. For instance, we've identified 4 warning signs for Universe Entertainment and Culture Group (3 are significant) that you should be aware of.

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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.