Shareholders in Sa Sa International Holdings (HKG:178) have lost 52%, as stock drops 7.1% this past week

By
Simply Wall St
Published
August 18, 2021
SEHK:178
Source: Shutterstock

Investing in stocks inevitably means buying into some companies that perform poorly. But the last three years have been particularly tough on longer term Sa Sa International Holdings Limited (HKG:178) shareholders. So they might be feeling emotional about the 57% share price collapse, in that time. Even worse, it's down 12% in about a month, which isn't fun at all. We do note, however, that the broader market is down 7.0% in that period, and this may have weighed on the share price.

Since Sa Sa International Holdings has shed HK$403m from its value in the past 7 days, let's see if the longer term decline has been driven by the business' economics.

Check out our latest analysis for Sa Sa International Holdings

Given that Sa Sa International Holdings 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. 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 three years Sa Sa International Holdings saw its revenue shrink by 31% per year. That means its revenue trend is very weak compared to other loss making companies. Arguably, the market has responded appropriately to this business performance by sending the share price down 16% (annualized) in the same time period. When revenue is dropping, and losses are still costing, and the share price sinking fast, it's fair to ask if something is remiss. After losing money on a declining business with falling stock price, we always consider whether eager bagholders are still offering us a reasonable exit price.

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

earnings-and-revenue-growth
SEHK:178 Earnings and Revenue Growth August 18th 2021

We're pleased to report that the CEO is remunerated more modestly than most CEOs at similarly capitalized companies. It's always worth keeping an eye on CEO pay, but a more important question is whether the company will grow earnings throughout the years. So it makes a lot of sense to check out what analysts think Sa Sa International Holdings will earn in the future (free profit forecasts).

What about the Total Shareholder Return (TSR)?

We've already covered Sa Sa International Holdings' share price action, but we should also mention its total shareholder return (TSR). 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. Its history of dividend payouts mean that Sa Sa International Holdings' TSR, which was a 52% drop over the last 3 years, was not as bad as the share price return.

A Different Perspective

It's good to see that Sa Sa International Holdings has rewarded shareholders with a total shareholder return of 38% in the last twelve months. There's no doubt those recent returns are much better than the TSR loss of 6% per year over five years. This makes us a little wary, but the business might have turned around its fortunes. 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. Consider for instance, the ever-present spectre of investment risk. We've identified 1 warning sign with Sa Sa International Holdings , and understanding them should be part of your investment process.

Of course, you might find a fantastic investment by looking elsewhere. So take a peek at this free list of companies we expect will grow earnings.

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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