While shareholders of Alibaba Health Information Technology (HKG:241) are in the red over the last three years, underlying earnings have actually grown

Many investors define successful investing as beating the market average over the long term. But the risk of stock picking is that you will likely buy under-performing companies. Unfortunately, that's been the case for longer term Alibaba Health Information Technology Limited (HKG:241) shareholders, since the share price is down 49% in the last three years, falling well short of the market return of around 23%. Shareholders have had an even rougher run lately, with the share price down 27% in the last 90 days.

While the stock has risen 5.7% in the past week but long term shareholders are still in the red, let's see what the fundamentals can tell us.

See our latest analysis for Alibaba Health Information Technology

We don't think that Alibaba Health Information Technology's modest trailing twelve month profit has the market's full attention at the moment. We think revenue is probably a better guide. Generally speaking, we'd consider a stock like this alongside loss-making companies, simply because the quantum of the profit is so low. For shareholders to have confidence a company will grow profits significantly, it must grow revenue.

In the last three years, Alibaba Health Information Technology saw its revenue grow by 35% per year, compound. That is faster than most pre-profit companies. The share price drop of 14% per year over three years would be considered disappointing by many, so you might argue the company is getting little credit for its impressive revenue growth. It's possible that the prior share price assumed unrealistically high future growth. Still, with high hopes now tempered, now might prove to be an opportunity to buy.

You can see below how earnings and revenue have changed over time (discover the exact values by clicking on the image).

Alibaba Health Information Technology is a well known stock, with plenty of analyst coverage, suggesting some visibility into future growth. So it makes a lot of sense to check out what analysts think Alibaba Health Information Technology will earn in the future (free analyst consensus estimates)

A Different Perspective

It's good to see that Alibaba Health Information Technology has rewarded shareholders with a total shareholder return of 25% in the last twelve months. That gain is better than the annual TSR over five years, which is 8%. Therefore it seems like sentiment around the company has been positive lately. Someone with an optimistic perspective could view the recent improvement in TSR as indicating that the business itself is getting better with time. 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. Case in point: We've spotted 2 warning signs for Alibaba Health Information Technology you should be aware of.

We will like Alibaba Health Information Technology 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 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.