Productive Technologies (HKG:650) adds HK$178m to market cap in the past 7 days, though investors from three years ago are still down 79%

It is a pleasure to report that the Productive Technologies Company Limited (HKG:650) is up 41% in the last quarter. But that doesn't change the fact that the returns over the last three years have been stomach churning. To wit, the share price sky-dived 79% in that time. So we're relieved for long term holders to see a bit of uplift. Only time will tell if the company can sustain the turnaround.

On a more encouraging note the company has added HK$178m to its market cap in just the last 7 days, so let's see if we can determine what's driven the three-year loss for shareholders.

See our latest analysis for Productive Technologies

Productive Technologies 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. Generally speaking, companies without profits are expected to grow revenue every year, and at a good clip. That's because it's hard to be confident a company will be sustainable if revenue growth is negligible, and it never makes a profit.

In the last three years, Productive Technologies saw its revenue grow by 29% per year, compound. That's well above most other pre-profit companies. So on the face of it we're really surprised to see the share price down 21% a year in the same time period. The share price makes us wonder if there is an issue with profitability. Sometimes fast revenue growth doesn't lead to profits. Unless the balance sheet is strong, the company might have to raise capital.

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

This free interactive report on Productive Technologies' balance sheet strength is a great place to start, if you want to investigate the stock further.

A Different Perspective

Productive Technologies shareholders are down 41% for the year, but the market itself is up 32%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. Unfortunately, last year's performance may indicate unresolved challenges, given that it was worse than the annualised loss of 11% over the last half decade. We realise that Baron Rothschild has said investors should "buy when there is blood on the streets", but we caution that investors should first be sure they are buying a high quality business. 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. For instance, we've identified 1 warning sign for Productive Technologies that you should be aware of.

If you would prefer to check out another company -- one with potentially superior financials -- then do not miss this free list of companies that have proven they can grow earnings.

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.