Wai Yuen Tong Medicine Holdings' (HKG:897) Shareholders Are Down 75% On Their Shares

Wai Yuen Tong Medicine Holdings Limited (HKG:897) shareholders should be happy to see the share price up 24% in the last quarter. But will that repair the damage for the weary investors who have owned this stock as it declined over half a decade? Probably not. Indeed, the share price is down a whopping 75% in that time. So we don't gain too much confidence from the recent recovery. The real question is whether the business can leave its past behind and improve itself over the years ahead.

View our latest analysis for Wai Yuen Tong Medicine Holdings

Wai Yuen Tong Medicine Holdings 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. Shareholders of unprofitable companies usually expect strong revenue growth. Some companies are willing to postpone profitability to grow revenue faster, but in that case one does expect good top-line growth.

In the last five years Wai Yuen Tong Medicine Holdings saw its revenue shrink by 2.7% per year. While far from catastrophic that is not good. If a business loses money, you want it to grow, so no surprises that the share price has dropped 12% each year in that time. It takes a certain kind of mental fortitude (or recklessness) to buy shares in a company that loses money and doesn't grow revenue. That is not really what the successful investors we know aim for.

The graphic below depicts how earnings and revenue have changed over time (unveil the exact values by clicking on the image).

Take a more thorough look at Wai Yuen Tong Medicine Holdings' financial health with this free report on its balance sheet.

What about the Total Shareholder Return (TSR)?

We'd be remiss not to mention the difference between Wai Yuen Tong Medicine Holdings' total shareholder return (TSR) and its share price return. The TSR attempts to capture the value of dividends (as if they were reinvested) as well as any spin-offs or discounted capital raisings offered to shareholders. Wai Yuen Tong Medicine Holdings' TSR of was a loss of 72% for the 5 years. That wasn't as bad as its share price return, because it has paid dividends.

A Different Perspective

Wai Yuen Tong Medicine Holdings shareholders gained a total return of 14% during the year. But that was short of the market average. On the bright side, that's still a gain, and it is certainly better than the yearly loss of about 12% endured over half a decade. So this might be a sign the business has turned its fortunes around. 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. Consider for instance, the ever-present spectre of investment risk. We've identified 3 warning signs with Wai Yuen Tong Medicine Holdings (at least 1 which is concerning) , and understanding them should be part of your investment process.

We will like Wai Yuen Tong Medicine Holdings better if we see some big insider buys. While we wait, check out this free list of growing companies with considerable, recent, insider buying.

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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