Tongda Group Holdings (HKG:698) adds HK$88m to market cap in the past 7 days, though investors from five years ago are still down 80%

Tongda Group Holdings Limited (HKG:698) shareholders should be happy to see the share price up 15% in the last month. But that doesn't change the fact that the returns over the last half decade have been stomach churning. Like a ship taking on water, the share price has sunk 82% in that time. It's true that the recent bounce could signal the company is turning over a new leaf, but we are not so sure. The real question is whether the business can leave its past behind and improve itself over the years ahead. We really hope anyone holding through that price crash has a diversified portfolio. Even when you lose money, you don't have to lose the lesson.

Although the past week has been more reassuring for shareholders, they're still in the red over the last five years, so let's see if the underlying business has been responsible for the decline.

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Because Tongda Group Holdings 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. 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 Tongda Group Holdings reduced its trailing twelve month revenue by 11% for each year. That puts it in an unattractive cohort, to put it mildly. So it's not altogether surprising to see the share price down 13% per year in the same time period. We don't think this is a particularly promising picture. Ironically, that behavior could create an opportunity for the contrarian investor - but only if there are good reasons to predict a brighter future.

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 Tongda Group Holdings stock, you should check out this FREE detailed report on its balance sheet.

What About The Total Shareholder Return (TSR)?

Investors should note that there's a difference between Tongda Group Holdings' total shareholder return (TSR) and its share price change, which we've covered above. 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. Its history of dividend payouts mean that Tongda Group Holdings' TSR, which was a 80% drop over the last 5 years, was not as bad as the share price return.

A Different Perspective

While the broader market gained around 29% in the last year, Tongda Group Holdings shareholders lost 8.7%. 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. However, the loss over the last year isn't as bad as the 12% per annum loss investors have suffered over the last half decade. We'd need to see some sustained improvements in the key metrics before we could muster much enthusiasm. Shareholders might want to examine this detailed historical graph of past earnings, revenue and cash flow.

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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.