Investors in Productive Technologies (HKG:650) from three years ago are still down 77%, even after 26% gain this past week

This week we saw the Productive Technologies Company Limited (HKG:650) share price climb by 26%. But that doesn't change the fact that the returns over the last three years have been stomach churning. Indeed, the share price is down a whopping 77% in the last three years. So it sure is nice to see a bit of an improvement. Only time will tell if the company can sustain the turnaround.

On a more encouraging note the company has added HK$356m to its market cap in just the last 7 days, so let's see if we can determine what's driven the three-year loss for shareholders.

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Productive Technologies 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. Shareholders of unprofitable companies usually desire strong revenue growth. Some companies are willing to postpone profitability to grow revenue faster, but in that case one would hope for good top-line growth to make up for the lack of earnings.

In the last three years Productive Technologies saw its revenue shrink by 28% per year. That means its revenue trend is very weak compared to other loss making companies. The swift share price decline at an annual compound rate of 21%, reflects this weak fundamental performance. Never forget that loss making companies with falling revenue can and do cause losses for everyday investors. There is a good reason that investors often describe buying a sharply falling stock price as 'trying to catch a falling knife'. Think about it.

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

We consider it positive that insiders have made significant purchases in the last year. Having said that, most people consider earnings and revenue growth trends to be a more meaningful guide to the business. Before buying or selling a stock, we always recommend a close examination of historic growth trends, available here..

A Different Perspective

Productive Technologies shareholders are up 12% for the year. But that return falls short of the market. On the bright side, that's still a gain, and it is certainly better than the yearly loss of about 9% endured over half a decade. It could well be that the business is stabilizing. Investors who like to make money usually check up on insider purchases, such as the price paid, and total amount bought. You can find out about the insider purchases of Productive Technologies by clicking this link.

There are plenty of other companies that have insiders buying up shares. You probably do not want to miss this free list of undervalued small cap 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 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.