Planetree International Development's (HKG:613) growing losses don't faze investors as the stock rallies 13% this past week

The most you can lose on any stock (assuming you don't use leverage) is 100% of your money. On the other hand, if you find a high quality business to buy (at the right price) you can more than double your money! Take, for example Planetree International Development Limited (HKG:613). Its share price is already up an impressive 238% in the last twelve months. Shareholders are also celebrating an even better 390% rise, over the last three months. It is also impressive that the stock is up 131% over three years, adding to the sense that it is a real winner.

Since the stock has added HK$106m to its market cap in the past week alone, let's see if underlying performance has been driving long-term returns.

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Because Planetree International Development made a loss in the last twelve months, we think the market is probably more focussed on revenue and revenue growth, at least for now. When a company doesn't make profits, we'd generally hope to see good revenue growth. That's because fast revenue growth can be easily extrapolated to forecast profits, often of considerable size.

Planetree International Development actually shrunk its revenue over the last year, with a reduction of 28%. So we would not have expected the share price to rise 238%. This is a good example of how buyers can push up prices even before the fundamental metrics show much growth. Of course, it could be that the market expected this revenue drop.

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

If you are thinking of buying or selling Planetree International Development stock, you should check out this FREE detailed report on its balance sheet.

A Different Perspective

We're pleased to report that Planetree International Development shareholders have received a total shareholder return of 238% over one year. That's better than the annualised return of 5% over half a decade, implying that the company is doing better recently. Someone with an optimistic perspective could view the recent improvement in TSR as indicating that the business itself is getting better with time. I find it very interesting to look at share price over the long term as a proxy for business performance. But to truly gain insight, we need to consider other information, too. Take risks, for example - Planetree International Development has 2 warning signs we think you should be aware of.

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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.