China Harmony Auto Holding (HKG:3836 investor three-year losses grow to 86% as the stock sheds HK$91m this past week

As an investor, mistakes are inevitable. But you have a problem if you face massive losses more than once in a while. So spare a thought for the long term shareholders of China Harmony Auto Holding Limited (HKG:3836); the share price is down a whopping 89% in the last three years. That would be a disturbing experience. The falls have accelerated recently, with the share price down 35% in the last three months. We really hope anyone holding through that price crash has a diversified portfolio. Even when you lose money, you don't have to lose the lesson.

If the past week is anything to go by, investor sentiment for China Harmony Auto Holding isn't positive, so let's see if there's a mismatch between fundamentals and the share price.

View our latest analysis for China Harmony Auto Holding

Because China Harmony Auto Holding made a loss in the last twelve months, we think the market is probably more focussed on revenue and revenue growth, at least for now. When a company doesn't make profits, we'd generally hope to see good revenue growth. Some companies are willing to postpone profitability to grow revenue faster, but in that case one would hope for good top-line growth to make up for the lack of earnings.

In the last three years China Harmony Auto Holding saw its revenue shrink by 4.2% per year. That is not a good result. The share price fall of 24% (per year, over three years) is a stern reminder that money-losing companies are expected to grow revenue. This business clearly needs to grow revenues if it is to perform as investors hope. There's no more than a snowball's chance in hell that share price will head back to its old highs, in the short term.

The company's revenue and earnings (over time) are depicted in the image below (click to see the exact numbers).

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. If you are thinking of buying or selling China Harmony Auto Holding stock, you should check out this free report showing analyst profit forecasts.

What About Dividends?

As well as measuring the share price return, investors should also consider the total shareholder return (TSR). Whereas the share price return only reflects the change in the share price, the TSR includes the value of dividends (assuming they were reinvested) and the benefit of any discounted capital raising or spin-off. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. We note that for China Harmony Auto Holding the TSR over the last 3 years was -86%, which is better than the share price return mentioned above. This is largely a result of its dividend payments!

A Different Perspective

China Harmony Auto Holding shareholders are up 2.0% for the year (even including dividends). 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 13% endured over half a decade. It could well be that the business is stabilizing. It's always interesting to track share price performance over the longer term. But to understand China Harmony Auto Holding better, we need to consider many other factors. Case in point: We've spotted 2 warning signs for China Harmony Auto Holding you should be aware of.

We will like China Harmony Auto Holding better if we see some big insider buys. While we wait, check out this free list of undervalued stocks (mostly small caps) 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.