Investors push Sihuan Pharmaceutical Holdings Group (HKG:460) 4.2% lower this week, company's increasing losses might be to blame

Passive investing in index funds can generate returns that roughly match the overall market. But if you pick the right individual stocks, you could make more than that. To wit, the Sihuan Pharmaceutical Holdings Group Ltd. (HKG:460) share price is 100% higher than it was a year ago, much better than the market return of around 37% (not including dividends) in the same period. If it can keep that out-performance up over the long term, investors will do very well! Also impressive, the stock is up 68% over three years, making long term shareholders happy, too.

While the stock has fallen 4.2% this week, it's worth focusing on the longer term and seeing if the stocks historical returns have been driven by the underlying fundamentals.

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Sihuan Pharmaceutical Holdings Group isn't currently profitable, so most analysts would look to revenue growth to get an idea of how fast the underlying business is growing. 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.

Over the last twelve months, Sihuan Pharmaceutical Holdings Group's revenue grew by 20%. That's a fairly respectable growth rate. While the share price performed well, gaining 100% over twelve months, you could argue the revenue growth warranted it. If the company can maintain the revenue growth, the share price could go higher still. But it's crucial to check profitability and cash flow before forming a view on the future.

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

Take a more thorough look at Sihuan Pharmaceutical Holdings Group's financial health with this free report on its balance sheet.

A Different Perspective

It's good to see that Sihuan Pharmaceutical Holdings Group has rewarded shareholders with a total shareholder return of 101% in the last twelve months. And that does include the dividend. That gain is better than the annual TSR over five years, which is 14%. 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. You could get a better understanding of Sihuan Pharmaceutical Holdings Group's growth by checking out this more detailed historical graph of earnings, revenue and cash flow.

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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.