Can You Imagine How Elated Tree Holdings' (HKG:8395) Shareholders Feel About Its 625% Share Price Gain?

While some are satisfied with an index fund, active investors aim to find truly magnificent investments on the stock market. While not every stock performs well, when investors win, they can win big. For example, the Tree Holdings Limited (HKG:8395) share price rocketed moonwards 625% in just one year. It's also good to see the share price up 236% over the last quarter. Tree Holdings hasn't been listed for long, so it's still not clear if it is a long term winner.

It really delights us to see such great share price performance for investors.

Check out our latest analysis for Tree Holdings

While Tree Holdings made a small profit, in the last year, we think that the market is probably more focussed on the top line growth at the moment. 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 year Tree Holdings saw its revenue shrink by 1.4%. So it's very confusing to see that the share price gained a whopping 625%. There can be no doubt this kind of decoupling of revenue growth and share price growth is unusual to see in loss making companies. While this gain looks like speculative buying to us, sometimes speculation pays off.

You can see how earnings and revenue have changed over time in the image below (click on the chart to see the exact values).

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. This free interactive report on Tree Holdings' earnings, revenue and cash flow is a great place to start, if you want to investigate the stock further.

A Different Perspective

Tree Holdings boasts a total shareholder return of 625% for the last year. A substantial portion of that gain has come in the last three months, with the stock up 236% in that time. This suggests the company is continuing to win over new investors. 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 risks, for instance. Every company has them, and we've spotted 1 warning sign for Tree Holdings you should know about.

Of course Tree Holdings may not be the best stock to buy. So you may wish to see this free collection of growth stocks.

Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on HK exchanges.

When trading Tree Holdings or any other investment, use the platform considered by many to be the Professional's Gateway to the Worlds Market, Interactive Brokers. You get the lowest-cost* trading on stocks, options, futures, forex, bonds and funds worldwide from a single integrated account. Promoted

This article by Simply Wall St is general in nature. 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.
^*Interactive Brokers Rated Lowest Cost Broker by StockBrokers.com Annual Online Review 2020

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.