Investing in stocks inevitably means buying into some companies that perform poorly. But the last three years have been particularly tough on longer term Sihuan Pharmaceutical Holdings Group Ltd. (HKG:460) shareholders. Unfortunately, they have held through a 75% decline in the share price in that time. The more recent news is of little comfort, with the share price down 34% in a year. Furthermore, it's down 18% in about a quarter. That's not much fun for holders.
Given the past week has been tough on shareholders, let's investigate the fundamentals and see what we can learn.
Given that Sihuan Pharmaceutical Holdings Group 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. When a company doesn't make profits, we'd generally hope to see good 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.
In the last three years Sihuan Pharmaceutical Holdings Group saw its revenue shrink by 8.1% per year. That is not a good result. The share price fall of 21% (per year, over three years) is a stern reminder that money-losing companies are expected to grow revenue. We're generally averse to companies with declining revenues, but we're not alone in that. Don't let a share price decline ruin your calm. You make better decisions when you're calm.
You can see below how earnings and revenue have changed over time (discover the exact values by clicking on the image).
Take a more thorough look at Sihuan Pharmaceutical Holdings Group's financial health with this free report on its balance sheet.
What About The Total Shareholder Return (TSR)?
We'd be remiss not to mention the difference between Sihuan Pharmaceutical Holdings Group's total shareholder return (TSR) and its share price return. The TSR is a return calculation that accounts for the value of cash dividends (assuming that any dividend received was reinvested) and the calculated value of any discounted capital raisings and spin-offs. Dividends have been really beneficial for Sihuan Pharmaceutical Holdings Group shareholders, and that cash payout explains why its total shareholder loss of 69%, over the last 3 years, isn't as bad as the share price return.
A Different Perspective
We regret to report that Sihuan Pharmaceutical Holdings Group shareholders are down 30% for the year. Unfortunately, that's worse than the broader market decline of 9.9%. However, it could simply be that the share price has been impacted by broader market jitters. It might be worth keeping an eye on the fundamentals, in case there's a good opportunity. Unfortunately, last year's performance may indicate unresolved challenges, given that it was worse than the annualised loss of 10% over the last half decade. Generally speaking long term share price weakness can be a bad sign, though contrarian investors might want to research the stock in hope of a turnaround. Shareholders might want to examine this detailed historical graph of past earnings, revenue and cash flow.
But note: Sihuan Pharmaceutical Holdings Group may not be the best stock to buy. So take a peek at this free list of interesting companies with past earnings growth (and further growth forecast).
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.