Investors push Abonmax (TWSE:2429) 10% lower this week, company's increasing losses might be to blame

Simply Wall St · 10/15 22:33

While Abonmax Co., Ltd (TWSE:2429) shareholders are probably generally happy, the stock hasn't had particularly good run recently, with the share price falling 30% in the last quarter. On the other hand the share price is higher than it was three years ago. Arguably you'd have been better off buying an index fund, because the gain of 48% in three years isn't amazing.

Since the long term performance has been good but there's been a recent pullback of 10%, let's check if the fundamentals match the share price.

Check out our latest analysis for Abonmax

Abonmax 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 3 years Abonmax saw its revenue shrink by 37% per year. Despite the lack of revenue growth, the stock has returned 14%, compound, over three years. If the company is cutting costs profitability could be on the horizon, but the revenue decline is a prima facie concern.

The company's revenue and earnings (over time) are depicted in the image below (click to see the exact numbers).

earnings-and-revenue-growth
TWSE:2429 Earnings and Revenue Growth October 15th 2024

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

What About The Total Shareholder Return (TSR)?

Investors should note that there's a difference between Abonmax's total shareholder return (TSR) and its share price change, which we've covered above. Arguably the TSR is a more complete return calculation because it accounts for the value of dividends (as if they were reinvested), along with the hypothetical value of any discounted capital that have been offered to shareholders. We note that Abonmax's TSR, at 90% is higher than its share price return of 48%. When you consider it hasn't been paying a dividend, this data suggests shareholders have benefitted from a spin-off, or had the opportunity to acquire attractively priced shares in a discounted capital raising.

A Different Perspective

It's nice to see that Abonmax shareholders have received a total shareholder return of 88% over the last year. Since the one-year TSR is better than the five-year TSR (the latter coming in at 4% per year), it would seem that the stock's performance has improved in recent times. Given the share price momentum remains strong, it might be worth taking a closer look at the stock, lest you miss an opportunity. 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. Consider for instance, the ever-present spectre of investment risk. We've identified 3 warning signs with Abonmax (at least 2 which are concerning) , and understanding them should be part of your investment process.

Of course, you might find a fantastic investment by looking elsewhere. So take a peek at this free list of companies we expect will grow earnings.

Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on Taiwanese exchanges.