Investors bid Ruicheng (China) Media Group (HKG:1640) up HK$157m despite increasing losses YoY, taking three-year CAGR to 90%

For us, stock picking is in large part the hunt for the truly magnificent stocks. But when you hold the right stock for the right time period, the rewards can be truly huge. One such superstar is Ruicheng (China) Media Group Limited (HKG:1640), which saw its share price soar 589% in three years. On top of that, the share price is up 208% in about a quarter. It really delights us to see such great share price performance for investors.

The past week has proven to be lucrative for Ruicheng (China) Media Group investors, so let's see if fundamentals drove the company's three-year performance.

See our latest analysis for Ruicheng (China) Media Group

Given that Ruicheng (China) Media 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. Generally speaking, companies without profits are expected to grow revenue every year, and at a good clip. As you can imagine, fast revenue growth, when maintained, often leads to fast profit growth.

In the last 3 years Ruicheng (China) Media Group saw its revenue shrink by 15% per year. This is in stark contrast to the strong share price growth of 90%, compound, per year. This clear lack of correlation between revenue and share price is surprising to see in a money losing company. At the risk of upsetting holders, this does suggest that hope for a better future is playing a significant role in the share price action.

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

We like that insiders have been buying shares in the last twelve months. Having said that, most people consider earnings and revenue growth trends to be a more meaningful guide to the business. This free interactive report on Ruicheng (China) Media Group's earnings, revenue and cash flow is a great place to start, if you want to investigate the stock further.

A Different Perspective

It's nice to see that Ruicheng (China) Media Group shareholders have received a total shareholder return of 558% over the last year. That's better than the annualised return of 14% over half a decade, implying that the company is doing better recently. Someone with an optimistic perspective could view the recent improvement in TSR as indicating that the business itself is getting better with time. 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. Case in point: We've spotted 3 warning signs for Ruicheng (China) Media Group you should be aware of, and 1 of them is a bit unpleasant.

Ruicheng (China) Media Group is not the only stock that insiders are buying. For those who like to find lesser know companies 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 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.