A good week for Tuniu (NASDAQ:TOUR) shareholders doesn’t ease the pain of losing five years
Tuniu Corporation (NASDAQ: VISIT) has rebounded strongly over the past week, with the stock price soaring 67%. But will it undo the damage for the weary investors who owned this stock as it waned for half a decade? Probably not. In fact, the stock price plummeted from a mountain to land 90% lower after this time. So we are not gaining too much confidence with the recent recovery. The million-dollar question is whether the company can justify a long-term takeover. We really hope that anyone weathering this price drop has a diversified portfolio. Even when you lose money, you don’t have to lose the lesson.
On a more encouraging note, the company has added 41 million Canadian yen to its market capitalization in the last 7 days alone, so let’s see if we can determine what resulted in the five-year loss for shareholders.
Given that Tuniu has posted a loss over the past twelve months, we think the market is likely more focused on revenue and revenue growth, at least for now. When a business is not making a profit, you generally expect to see good revenue growth. Some companies are willing to defer profitability to increase revenue faster, but in this case, good revenue growth is expected.
Over the past five years, Tuniu has seen its income decline by 49% per year. That puts him in an unattractive cohort, to say the least. It is therefore not so strange that the share price fell by 14% per year during this period. This type of price performance makes us very suspicious, especially when combined with declining revenues. Of course, the poor performance could mean the market was too harsh to sell. It can happen.
The company’s revenues and profits (over time) are shown in the image below (click to see exact figures).
Take a closer look at Tuniu’s financial health with this free report on its balance sheet.
A different perspective
While the wider market lost around 20% in the twelve months, Tuniu shareholders fared even worse, losing 65%. That said, it is inevitable that some stocks will be oversold in a falling market. The key is to keep your eyes on the fundamental developments. Unfortunately, last year’s performance capped a bad run, with shareholders facing a total loss of 14% per year over five years. Generally speaking, long-term stock price weakness can be a bad sign, though contrarian investors might want to hunt for the stock in hopes of a turnaround. I find it very interesting to look at stock price over the long term as a proxy for company performance. But to really get insight, we also need to consider other information. To this end, you should be aware of the 1 warning sign we spotted with Tuniu .
If you’d rather check out another company – one with potentially superior finances – then don’t miss this free list of companies that have proven that they can increase their profits.
Please note that the market returns quoted in this article reflect the average market-weighted returns of stocks currently trading on US exchanges.
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This Simply Wall St article is general in nature. We provide commentary based on historical data and analyst forecasts only using unbiased methodology and our articles are not intended to be financial advice. It is not a recommendation to buy or sell stocks and does not take into account your objectives or financial situation. Our goal is to bring you targeted long-term analysis based on fundamental data. Note that our analysis may not take into account the latest announcements from price-sensitive companies or qualitative materials. Simply Wall St has no position in the stocks mentioned.