It hasn’t been the best quarter for Zhejiang Shibao Company Limited (HKG:1057) shareholders, since the share price has fallen 11% in that time. But that shouldn’t obscure the pleasing returns achieved by shareholders over the last three years. In the last three years the share price is up, 79%: better than the market.
Since the stock has added CN¥134m to its market cap in the past week alone, let’s see if underlying performance has been driving long-term returns.
However if you’d rather see where the opportunities and risks are within 1057’s industry, you can check out our analysis on the HK Auto Components industry.
While Zhejiang Shibao made a small profit, in the last year, we think that the market is probably more focussed on the top line growth at the moment. As a general rule, we think this kind of company is more comparable to loss-making stocks, since the actual profit is so low. It would be hard to believe in a more profitable future without growing revenues.
Over the last three years Zhejiang Shibao has grown its revenue at 7.9% annually. That’s not a very high growth rate considering it doesn’t make profits. The modest growth is probably broadly reflected in the share price, which is up 21%, per year over 3 years. Ultimately, the important thing is whether the company is trending to profitability. Given the market doesn’t seem too excited about the stock, a closer look at the financial data could pay off, if you can find indications of a stronger growth trend in the future.
The graphic below depicts how earnings and revenue have changed over time (unveil the exact values by clicking on the image).
It’s probably worth noting that the CEO is paid less than the median at similar sized companies. But while CEO remuneration is always worth checking, the really important question is whether the company can grow earnings going forward. It might be well worthwhile taking a look at our free report on Zhejiang Shibao’s earnings, revenue and cash flow.
A Different Perspective
While it’s certainly disappointing to see that Zhejiang Shibao shares lost 8.0% throughout the year, that wasn’t as bad as the market loss of 20%. Of far more concern is the 8% p.a. loss served to shareholders over the last five years. This sort of share price action isn’t particularly encouraging, but at least the losses are slowing. 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 example, we’ve discovered 4 warning signs for Zhejiang Shibao (2 shouldn’t be ignored!) that you should be aware of before investing here.
We will like Zhejiang Shibao better if we see some big insider buys. While we wait, check out this free list of growing companies with considerable, recent, insider buying.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on HK 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.
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