When you buy shares in a company, there is always a risk that the price drops to zero. But if you pick the right business to buy shares in, you can make more than you can lose. For example, the New Focus Auto Tech Holdings Limited (HKG:360) share price has soared 191% return in just a single year. And in the last month, the share price has gained 145%. We note that New Focus Auto Tech Holdings reported its financial results recently; luckily, you can catch up on the latest revenue and profit numbers in our company report. Looking back further, the stock price is 79% higher than it was three years ago.
After a strong gain in the past week, it's worth seeing if longer term returns have been driven by improving fundamentals.
View our latest analysis for New Focus Auto Tech Holdings
Given that New Focus Auto Tech Holdings 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. Shareholders of unprofitable companies usually expect strong revenue growth. 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.
Over the last twelve months, New Focus Auto Tech Holdings' revenue grew by 0.3%. That's not great considering the company is losing money. In contrast, the share price took off during the year, gaining 191%. We're happy that investors have made money, though we wonder if the increase will be sustained. We're not so sure that revenue growth is driving the market optimism about the stock.
The graphic below depicts how earnings and revenue have changed over time (unveil the exact values by clicking on the image).
We consider it positive that insiders have made significant purchases in the last year. Having said that, most people consider earnings and revenue growth trends to be a more meaningful guide to the business. It might be well worthwhile taking a look at our free report on New Focus Auto Tech Holdings' earnings, revenue and cash flow.
A Different Perspective
It's good to see that New Focus Auto Tech Holdings has rewarded shareholders with a total shareholder return of 191% in the last twelve months. There's no doubt those recent returns are much better than the TSR loss of 9% per year over five years. The long term loss makes us cautious, but the short term TSR gain certainly hints at a brighter future. 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. To that end, you should learn about the 2 warning signs we've spotted with New Focus Auto Tech Holdings (including 1 which is concerning) .
If you like to buy stocks alongside management, then you might just love this free list of companies. (Hint: insiders have been buying them).
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on Hong Kong 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.