It is doubtless a positive to see that the Rastar Group (SZSE:300043) share price has gained some 48% in the last three months. But if you look at the last five years the returns have not been good. You would have done a lot better buying an index fund, since the stock has dropped 25% in that half decade.
Since Rastar Group has shed CN¥1.1b from its value in the past 7 days, let's see if the longer term decline has been driven by the business' economics.
Rastar 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 half a decade Rastar Group reduced its trailing twelve month revenue by 9.6% for each year. That puts it in an unattractive cohort, to put it mildly. It seems pretty reasonable to us that the share price dipped 5% per year in that time. We doubt many shareholders are delighted with this share price performance. It is possible for businesses to bounce back but as Buffett says, 'turnarounds seldom turn'.
You can see below how earnings and revenue have changed over time (discover the exact values by clicking on the image).
We're pleased to report that the CEO is remunerated more modestly than most CEOs at similarly capitalized companies. It's always worth keeping an eye on CEO pay, but a more important question is whether the company will grow earnings throughout the years. Dive deeper into the earnings by checking this interactive graph of Rastar Group's earnings, revenue and cash flow.
A Different Perspective
It's nice to see that Rastar Group shareholders have received a total shareholder return of 14% over the last year. Notably the five-year annualised TSR loss of 4% per year compares very unfavourably with the recent share price performance. This makes us a little wary, but the business might have turned around its fortunes. It's always interesting to track share price performance over the longer term. But to understand Rastar Group better, we need to consider many other factors. To that end, you should be aware of the 3 warning signs we've spotted with Rastar Group .
We will like Rastar Group better if we see some big insider buys. While we wait, check out this free list of undervalued stocks (mostly small caps) 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 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.