It is doubtless a positive to see that the MicroPort Scientific Corporation (HKG:853) share price has gained some 51% in the last three months. But that doesn't change the fact that the returns over the last three years have been stomach churning. In that time the share price has melted like a snowball in the desert, down 77%. So we're relieved for long term holders to see a bit of uplift. The thing to think about is whether the business has really turned around.

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

View our latest analysis for MicroPort Scientific

Given that MicroPort Scientific didn't make a profit in the last twelve months, we'll focus on revenue growth to form a quick view of its business development. When a company doesn't make profits, we'd generally hope to see good revenue growth. As you can imagine, fast revenue growth, when maintained, often leads to fast profit growth.

In the last three years, MicroPort Scientific saw its revenue grow by 11% per year, compound. That's a fairly respectable growth rate. So it's hard to believe the share price decline of 21% per year is due to the revenue. It could be that the losses were much larger than expected. If you buy into companies that lose money then you always risk losing money yourself. Just don't lose the lesson.

You can see how earnings and revenue have changed over time in the image below (click on the chart to see the exact values).

Take a more thorough look at MicroPort Scientific's financial health with this free report on its balance sheet.

A Different Perspective

MicroPort Scientific shareholders are down 13% for the year, but the market itself is up 27%. 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. Unfortunately, last year's performance may indicate unresolved challenges, given that it was worse than the annualised loss of 3% over the last half decade. Generally speaking long term share price weakness can be a bad sign, though contrarian investors might want to research the stock in hope of a turnaround. 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. For instance, we've identified 2 warning signs for MicroPort Scientific that you should be aware of.

We will like MicroPort Scientific better if we see some big insider buys. While we wait, check out this free list of undervalued stocks (mostly small caps) 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 Hong Kong exchanges.

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