Creative China Holdings (HKG:8368) shareholders notch a 277% return over 1 year, yet earnings have been shrinking

When you buy shares in a company, there is always a risk that the price drops to zero. But if you pick the right business to buy shares in, you can make more than you can lose. For example, the Creative China Holdings Limited (HKG:8368) share price has soared 277% in the last 1 year. Most would be very happy with that, especially in just one year! It's also good to see the share price up 45% over the last quarter. It is also impressive that the stock is up 186% over three years, adding to the sense that it is a real winner.

Since it's been a strong week for Creative China Holdings shareholders, let's have a look at trend of the longer term fundamentals.

See our latest analysis for Creative China Holdings

To paraphrase Benjamin Graham: Over the short term the market is a voting machine, but over the long term it's a weighing machine. 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 the last year, Creative China Holdings actually saw its earnings per share drop 87%.

So we don't think that investors are paying too much attention to EPS. Indeed, when EPS is declining but the share price is up, it often means the market is considering other factors.

We think that the revenue growth of 51% could have some investors interested. We do see some companies suppress earnings in order to accelerate revenue growth.

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

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. It might be well worthwhile taking a look at our free report on Creative China Holdings' earnings, revenue and cash flow.

A Different Perspective

It's nice to see that Creative China Holdings shareholders have received a total shareholder return of 277% over the last year. That gain is better than the annual TSR over five years, which is 6%. Therefore it seems like sentiment around the company has been positive lately. Given the share price momentum remains strong, it might be worth taking a closer look at the stock, lest you miss an opportunity. 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. Take risks, for example - Creative China Holdings has 5 warning signs (and 1 which is a bit unpleasant) we think you should know about.

Creative China 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 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.