Hutchison China MediTech Limited (LON:HCM) shareholders have seen the share price descend 20% over the month. But that scarcely detracts from the really solid long term returns generated by the company over five years. Indeed, the share price is up an impressive 152% in that time. So while it's never fun to see a share price fall, it's important to look at a longer time horizon. Ultimately business performance will determine whether the stock price continues the positive long term trend. While the long term returns are impressive, we do have some sympathy for those who bought more recently, given the 41% drop, in the last year.
Because Hutchison China MediTech is loss-making, 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 expect to see good revenue growth. As you can imagine, fast revenue growth, when maintained, often leads to fast profit growth.
In the last 5 years Hutchison China MediTech saw its revenue grow at 16% per year. That's well above most pre-profit companies. So it's not entirely surprising that the share price reflected this performance by increasing at a rate of 20% per year, in that time. So it seems likely that buyers have paid attention to the strong revenue growth. To our minds that makes Hutchison China MediTech worth investigating - it may have its best days ahead.
The image below shows how earnings and revenue have tracked over time (if you click on the image you can see greater detail).
Balance sheet strength is crucial. It might be well worthwhile taking a look at our free report on how its financial position has changed over time.
A Different Perspective
While the broader market gained around 2.7% in the last year, Hutchison China MediTech shareholders lost 41%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. On the bright side, long term shareholders have made money, with a gain of 20% per year over half a decade. It could be that the recent sell-off is an opportunity, so it may be worth checking the fundamental data for signs of a long term growth trend. You might want to assess this data-rich visualization of its earnings, revenue and cash flow.
We will like Hutchison China MediTech better if we see some big insider buys. While we wait, check out this free list of growing companies with considerable, recent, insider buying.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on GB exchanges.
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.
If you spot an error that warrants correction, please contact the editor at firstname.lastname@example.org. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned. Thank you for reading.