This week we saw the Sinco Pharmaceuticals Holdings Limited (HKG:6833) share price climb by 18%. But that doesn't change the fact that the returns over the last three years have been less than pleasing. In fact, the share price is down 46% in the last three years, falling well short of the market return.
Given that Sinco Pharmaceuticals Holdings didn't make a profit in the last twelve months, we'll focus on revenue growth to form a quick view of its business development. When a company doesn't make profits, we'd generally expect to see good revenue growth. 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 three years, Sinco Pharmaceuticals Holdings grew revenue at 1.5% per year. Given it's losing money in pursuit of growth, we are not really impressed with that. The stock dropped 19% during that time. If revenue growth accelerates, we might see the share price bounce. But the real upside for shareholders will be if the company can start generating profits.
You can see how earnings and revenue have changed over time in the image below (click on the chart to see the exact values).
You can see how its balance sheet has strengthened (or weakened) over time in this free interactive graphic.
A Different Perspective
Sinco Pharmaceuticals Holdings shareholders are down 24% for the year, falling short of the market return. Meanwhile, the broader market slid about 17%, likely weighing on the stock. The three-year loss of 19% per year isn't as bad as the last twelve months, suggesting that the company has not been able to convince the market it has solved its problems. Although Baron Rothschild famously said to "buy when there's blood in the streets, even if the blood is your own", he also focusses on high quality stocks with solid prospects. While it is well worth considering the different impacts that market conditions can have on the share price, there are other factors that are even more important. Consider for instance, the ever-present spectre of investment risk. We've identified 6 warning signs with Sinco Pharmaceuticals Holdings (at least 1 which doesn't sit too well with us) , and understanding them should be part of your investment process.
If you are like me, then you will not want to miss this free list of growing 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 HK exchanges.
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