China Cultural Tourism and Agriculture Group Limited (HKG:542) shareholders will doubtless be very grateful to see the share price up 73% in the last month. But over the last half decade, the stock has not performed well. You would have done a lot better buying an index fund, since the stock has dropped 28% in that half decade.

While the last five years has been tough for China Cultural Tourism and Agriculture 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.

China Cultural Tourism and Agriculture 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.

Over five years, China Cultural Tourism and Agriculture Group grew its revenue at 63% per year. That's well above most other pre-profit companies. The share price drop of 5% per year over five years would be considered let down. So you might argue the China Cultural Tourism and Agriculture Group should get more credit for its rather impressive revenue growth over the period. If that's the case, now might be the smart time to take a close look at it.

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 we've seen significant insider buying in the last quarter, which we consider a positive. That said, we think earnings and revenue growth trends are even more important factors to consider. Dive deeper into the earnings by checking this interactive graph of China Cultural Tourism and Agriculture Group's earnings, revenue and cash flow.

A Different Perspective

China Cultural Tourism and Agriculture Group shareholders are down 28% for the year, but the market itself is up 6.0%. Even the share prices of good stocks drop sometimes, but we want to see improvements in the fundamental metrics of a business, before getting too interested. Unfortunately, last year's performance may indicate unresolved challenges, given that it was worse than the annualised loss of 5% over the last half decade. We realise that Baron Rothschild has said investors should "buy when there is blood on the streets", but we caution that investors should first be sure they are buying a high quality business. It's always interesting to track share price performance over the longer term. But to understand China Cultural Tourism and Agriculture Group better, we need to consider many other factors. Like risks, for instance. Every company has them, and we've spotted 4 warning signs for China Cultural Tourism and Agriculture Group (of which 2 are potentially serious!) you should know about.

There are plenty of other companies that have insiders buying up shares. You probably do not want to miss this free list of undervalued small cap companies that insiders are buying.

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.

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