Is Hai Kwang Enterprise's (TPE:2038) Share Price Gain Of 220% Well Earned?

Hai Kwang Enterprise Corporation (TPE:2038) shareholders might be concerned after seeing the share price drop 24% in the last month. But that doesn't change the fact that the returns over the last five years have been very strong. We think most investors would be happy with the 220% return, over that period. Generally speaking the long term returns will give you a better idea of business quality than short periods can. Ultimately business performance will determine whether the stock price continues the positive long term trend.

See our latest analysis for Hai Kwang Enterprise

Given that Hai Kwang Enterprise 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. Generally speaking, companies without profits are expected to grow revenue every year, and at a good clip. 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 5 years Hai Kwang Enterprise saw its revenue grow at 5.9% per year. That's not a very high growth rate considering the bottom line. In comparison, the share price rise of 26% per year over the last half a decade is pretty impressive. While we wouldn't be overly concerned, it might be worth checking whether you think the fundamental business gains really justify the share price action. Some might suggest that the sentiment around the stock is rather positive.

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

Balance sheet strength is crucial. It might be well worthwhile taking a look at our free report on how its financial position has changed over time.

A Different Perspective

It's good to see that Hai Kwang Enterprise has rewarded shareholders with a total shareholder return of 148% in the last twelve months. That gain is better than the annual TSR over five years, which is 26%. Therefore it seems like sentiment around the company has been positive lately. Given the share price momentum remains strong, it might be worth taking a closer look at the stock, lest you miss an opportunity. It's always interesting to track share price performance over the longer term. But to understand Hai Kwang Enterprise better, we need to consider many other factors. For instance, we've identified 2 warning signs for Hai Kwang Enterprise (1 can't be ignored) that you should be aware of.

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 TW exchanges.

If you’re looking to trade Hai Kwang Enterprise, open an account with the lowest-cost* platform trusted by professionals, Interactive Brokers. Their clients from over 200 countries and territories trade 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.