It's nice to see the Hengtai Securities Co., Ltd. (HKG:1476) share price up 12% in a week. But over the last half decade, the stock has not performed well. After all, the share price is down 46% in that time, significantly under-performing the market.

While the stock has risen 12% in the past week but long term shareholders are still in the red, let's see what the fundamentals can tell us.

View our latest analysis for Hengtai Securities

To quote Buffett, 'Ships will sail around the world but the Flat Earth Society will flourish. There will continue to be wide discrepancies between price and value in the marketplace...' One flawed but reasonable way to assess how sentiment around a company has changed is to compare the earnings per share (EPS) with the share price.

We know that Hengtai Securities has been profitable in the past. However, it made a loss in the last twelve months, suggesting profit may be an unreliable metric at this stage. Other metrics may better explain the share price move.

It could be that the revenue decline of 8.5% per year is viewed as evidence that Hengtai Securities is shrinking. That could explain the weak share price.

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

It's probably worth noting we've seen significant insider buying in the last quarter, which we consider a positive. That said, we think earnings and revenue growth trends are even more important factors to consider. Before buying or selling a stock, we always recommend a close examination of historic growth trends, available here..

A Different Perspective

Hengtai Securities shareholders are down 17% for the year, but the market itself is up 23%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. Unfortunately, last year's performance may indicate unresolved challenges, given that it was worse than the annualised loss of 8% over the last half decade. We realise that Baron Rothschild has said investors should "buy when there is blood on the streets", but we caution that investors should first be sure they are buying a high quality business. 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. Case in point: We've spotted 2 warning signs for Hengtai Securities you should be aware of, and 1 of them is potentially serious.

Hengtai Securities is not the only stock that insiders are buying. For those who like to find lesser know companies this free list of growing companies with recent insider purchasing, could be just the ticket.

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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