Tian Ge Interactive Holdings' (HKG:1980) Stock Price Has Reduced 78% In The Past Three Years

It is doubtless a positive to see that the Tian Ge Interactive Holdings Limited (HKG:1980) share price has gained some 140% in the last three months. But that doesn't change the fact that the returns over the last three years have been stomach churning. To wit, the share price sky-dived 78% in that time. So we're relieved for long term holders to see a bit of uplift. The thing to think about is whether the business has really turned around.

View our latest analysis for Tian Ge Interactive Holdings

While the efficient markets hypothesis continues to be taught by some, it has been proven that markets are over-reactive dynamic systems, and investors are not always rational. One flawed but reasonable way to assess how sentiment around a company has changed is to compare the earnings per share (EPS) with the share price.

During five years of share price growth, Tian Ge Interactive Holdings moved from a loss to profitability. We would usually expect to see the share price rise as a result. So it's worth looking at other metrics to try to understand the share price move.

Arguably the revenue decline of 26% per year has people thinking Tian Ge Interactive 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 how earnings and revenue have changed over time in the image below (click on the chart to see the exact values).

It's good to see that there was some significant insider buying in the last three months. That's a positive. On the other hand, we think the revenue and earnings trends are much more meaningful measures of the business. So it makes a lot of sense to check out what analysts think Tian Ge Interactive Holdings will earn in the future (free profit forecasts).

A Different Perspective

While the broader market gained around 24% in the last year, Tian Ge Interactive Holdings shareholders lost 20%. 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 10% 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 Tian Ge Interactive Holdings better, we need to consider many other factors. Case in point: We've spotted 3 warning signs for Tian Ge Interactive Holdings you should be aware of, and 1 of them is potentially serious.

Tian Ge Interactive Holdings is not the only stock that insiders are buying. For those who like to find winning investments 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 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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