Investors can approximate the average market return by buying an index fund. When you buy individual stocks, you can make higher profits, but you also face the risk of under-performance. That downside risk was realized by Mei Ah Entertainment Group Limited (HKG:391) shareholders over the last year, as the share price declined 41%. That falls noticeably short of the market return of around 26%. At least the damage isn't so bad if you look at the last three years, since the stock is down 8.6% in that time. Even worse, it's down 11% in about a month, which isn't fun at all. But this could be related to poor market conditions -- stocks are down 9.7% in the same time.
Since shareholders are down over the longer term, lets look at the underlying fundamentals over the that time and see if they've been consistent with returns.
Because Mei Ah Entertainment Group made a loss in the last twelve months, we think the market is probably more focussed on revenue and revenue growth, at least for now. Generally speaking, companies without profits are expected to grow revenue every year, and at a good clip. That's because fast revenue growth can be easily extrapolated to forecast profits, often of considerable size.
Mei Ah Entertainment Group grew its revenue by 28% over the last year. That's definitely a respectable growth rate. Meanwhile, the share price is down 41% over twelve months, which is disappointing given the progress made. You might even wonder if the share price was previously over-hyped. However, that's in the past now, and it's the future that matters most.
You can see below how earnings and revenue have changed over time (discover the exact values by clicking on the image).
We consider it positive that insiders have made significant purchases in the last year. Having said that, most people consider earnings and revenue growth trends to be a more meaningful guide to the business. Dive deeper into the earnings by checking this interactive graph of Mei Ah Entertainment Group's earnings, revenue and cash flow.
A Different Perspective
While the broader market gained around 26% in the last year, Mei Ah Entertainment Group shareholders lost 41%. 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. Regrettably, last year's performance caps off a bad run, with the shareholders facing a total loss of 3% per year over five years. 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. Take risks, for example - Mei Ah Entertainment Group has 2 warning signs (and 1 which doesn't sit too well with us) we think you should know about.
If you like to buy stocks alongside management, then you might just love this free list of companies. (Hint: most of them are flying under the radar).
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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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.