It is a pleasure to report that the Citychamp Watch & Jewellery Group Limited (HKG:256) is up 42% in the last quarter. But that cannot eclipse the less-than-impressive returns over the last three years. After all, the share price is down 21% in the last three years, significantly under-performing the market.

While the last three years has been tough for Citychamp Watch & Jewellery Group shareholders, this past week has shown signs of promise. So let's look at the longer term fundamentals and see if they've been the driver of the negative returns.

See our latest analysis for Citychamp Watch & Jewellery Group

Citychamp Watch & Jewellery Group 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 Citychamp Watch & Jewellery Group saw its revenue shrink by 18% per year. That's definitely a weaker result than most pre-profit companies report. With revenue in decline, the share price decline of 7% per year is hardly undeserved. The key question now is whether the company has the capacity to fund itself to profitability, without more cash. Of course, it is possible for businesses to bounce back from a revenue drop - but we'd want to see that before getting interested.

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

It's good to see that there was some significant insider buying in the last three months. That's a positive. On the other hand, we think the revenue and earnings trends are much more meaningful measures of the business. Dive deeper into the earnings by checking this interactive graph of Citychamp Watch & Jewellery Group's earnings, revenue and cash flow.

A Different Perspective

While it's certainly disappointing to see that Citychamp Watch & Jewellery Group shares lost 9.7% throughout the year, that wasn't as bad as the market loss of 21%. Given the total loss of 3% per year over five years, it seems returns have deteriorated in the last twelve months. Whilst Baron Rothschild does tell the investor "buy when there's blood in the streets, even if the blood is your own", buyers would need to examine the data carefully to be comfortable that the business itself is sound. 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. Consider for instance, the ever-present spectre of investment risk. We've identified 2 warning signs with Citychamp Watch & Jewellery Group (at least 1 which makes us a bit uncomfortable) , and understanding them should be part of your investment process.

Citychamp Watch & Jewellery Group is not the only stock that insiders are buying. For those who like to find winning investments this free list of growing companies with recent insider purchasing, could be just the ticket.

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

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