While it may not be enough for some shareholders, we think it is good to see the Tangrenshen Group Co., Ltd (SZSE:002567) share price up 23% in a single quarter. But if you look at the last five years the returns have not been good. In fact, the share price is down 37%, which falls well short of the return you could get by buying an index fund.
While the stock has risen 5.8% in the past week but long term shareholders are still in the red, let's see what the fundamentals can tell us.
Tangrenshen Group isn't currently profitable, so most analysts would look to revenue growth to get an idea of how fast the underlying business is growing. Generally speaking, companies without profits are expected to grow revenue every year, and at a good clip. That's because fast revenue growth can be easily extrapolated to forecast profits, often of considerable size.
In the last half decade, Tangrenshen Group saw its revenue increase by 11% per year. That's a fairly respectable growth rate. We doubt many shareholders are ok with the fact the share price has fallen 7% each year for half a decade. Those who bought back then clearly believed in stronger growth - and maybe even profits. There is always a big risk of losing money yourself when you buy shares in a company that loses money.
You can see below how earnings and revenue have changed over time (discover the exact values by clicking on the image).
You can see how its balance sheet has strengthened (or weakened) over time in this free interactive graphic.
What About The Total Shareholder Return (TSR)?
We'd be remiss not to mention the difference between Tangrenshen 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 Tangrenshen Group shareholders, and that cash payout explains why its total shareholder loss of 34%, over the last 5 years, isn't as bad as the share price return.
A Different Perspective
While the broader market gained around 14% in the last year, Tangrenshen Group shareholders lost 20%. 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 6% 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. You could get a better understanding of Tangrenshen Group's growth by checking out this more detailed historical graph of earnings, revenue and cash flow.
If you are like me, then you will not want to miss this free list of undervalued small caps 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 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.
