WebX International Holdings (HKG:8521) surges 13% this week, taking three-year gains to 758%

For us, stock picking is in large part the hunt for the truly magnificent stocks. Mistakes are inevitable, but a single top stock pick can cover any losses, and so much more. For example, the WebX International Holdings Company Limited (HKG:8521) share price is up a whopping 758% in the last three years, a handsome return for long term holders. Also pleasing for shareholders was the 47% gain in the last three months. It really delights us to see such great share price performance for investors.

Since the stock has added HK$77m 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 WebX International 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 fast revenue growth can be easily extrapolated to forecast profits, often of considerable size.

Over the last three years WebX International Holdings has grown its revenue at 4.1% annually. That's not a very high growth rate considering it doesn't make profits. Therefore, we're a little surprised to see the share price gain has been so strong, at 105% per year, compound, over three years. We'll tip our hats to that, any day, but the top-line growth isn't particularly impressive when you compare it to other pre-profit companies. The company will need to continue to execute on its business strategy to justify this rise.

The image below shows how earnings and revenue have tracked over time (if you click on the image you can see greater detail).

You can see how its balance sheet has strengthened (or weakened) over time in this free interactive graphic.

A Different Perspective

WebX International Holdings shareholders are up 32% for the year. But that return falls short of the market. If we look back over five years, the returns are even better, coming in at 37% per year for five years. It may well be that this is a business worth popping on the watching, given the continuing positive reception, over time, from the market. It's always interesting to track share price performance over the longer term. But to understand WebX International Holdings better, we need to consider many other factors. Take risks, for example - WebX International Holdings has 3 warning signs (and 1 which can't be ignored) we think you should know about.

Of course WebX International Holdings may not be the best stock to buy. So you may wish to see this free collection of growth stocks.

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.