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TRS Information Technology (SZSE:300229) Investors Are up 3.6% in the Past Week, but Earnings Have Declined Over the Last Five Years

Simply Wall St ·  Oct 24, 2024 13:46

When you buy shares in a company, it's worth keeping in mind the possibility that it could fail, and you could lose your money. But when you pick a company that is really flourishing, you can make more than 100%. For example, the TRS Information Technology Co., Ltd. (SZSE:300229) share price has soared 128% in the last half decade. Most would be very happy with that. And in the last month, the share price has gained 42%. But the price may well have benefitted from a buoyant market, since stocks have gained 27% in the last thirty days.

The past week has proven to be lucrative for TRS Information Technology investors, so let's see if fundamentals drove the company's five-year performance.

We don't think that TRS Information Technology's modest trailing twelve month profit has the market's full attention at the moment. We think revenue is probably a better guide. 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 half decade TRS Information Technology's revenue has actually been trending down at about 4.3% per year. Given that scenario, we wouldn't have expected the share price to rise 18% per year, but that's what it did. It just goes to show tht the market is forward looking, and it's not always easy to predict the future based on past trends. Still, this situation makes us a little wary of the stock.

The graphic below depicts how earnings and revenue have changed over time (unveil the exact values by clicking on the image).

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SZSE:300229 Earnings and Revenue Growth October 24th 2024

Take a more thorough look at TRS Information Technology's financial health with this free report on its balance sheet.

What About Dividends?

When looking at investment returns, it is important to consider the difference between total shareholder return (TSR) and share price return. The TSR incorporates the value of any spin-offs or discounted capital raisings, along with any dividends, based on the assumption that the dividends are reinvested. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. In the case of TRS Information Technology, it has a TSR of 132% for the last 5 years. That exceeds its share price return that we previously mentioned. And there's no prize for guessing that the dividend payments largely explain the divergence!

A Different Perspective

TRS Information Technology shareholders are up 3.2% for the year (even including dividends). But that was short of the market average. It's probably a good sign that the company has an even better long term track record, having provided shareholders with an annual TSR of 18% over five years. It may well be that this is a business worth popping on the watching, given the continuing positive reception, over time, from the market. It's always interesting to track share price performance over the longer term. But to understand TRS Information Technology better, we need to consider many other factors. Take risks, for example - TRS Information Technology has 3 warning signs we think you should be aware of.

For those who like to find winning investments this free list of undervalued 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 Chinese 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.

Disclaimer: This content is for informational and educational purposes only and does not constitute a recommendation or endorsement of any specific investment or investment strategy. Read more
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