MGM China Holdings (HKG: 2282) shareholders are in the red if they invested five years ago
MGM China Holdings Limited (HKG: 2282) Shareholders should be happy to see the stock price rise 17% last month. But don’t envy the holders – looking back 5 years, the returns have been really bad. Indeed, the share price is down 57% over the period. We are therefore reluctant to give much weight to the short-term increase. Of course, this could be the start of a turnaround.
Since shareholders are down for the long haul, let’s take a look at the underlying fundamentals over this time frame and see if they’ve been consistent with returns.
Check out our latest analysis for MGM China Holdings
Since MGM China Holdings has not made a profit in the past twelve months, we will focus on revenue growth to get a quick view of its business development. Shareholders of unprofitable companies generally expect strong revenue growth. As you can imagine, rapid revenue growth, when sustained, often leads to rapid profit growth.
Over the past five years, MGM China Holdings has seen its turnover decline by 6.6% per year. This is not what investors generally want to see. Without growth in profits and revenues, the loss of 9% per year does not really surprise us. We believe that no one is rushing to buy this stock. Ultimately, it may be worth watching – if income grows, the stock price could follow.
The company’s revenue and profits (over time) are shown in the image below (click to see exact numbers).
We consider it positive that insiders have made significant purchases over the past year. Even so, future profits will be much more important to whether current shareholders make money. If you are planning to buy or sell shares of MGM China Holdings, you should check this out free report showing analysts’ earnings forecasts.
What about the Total Shareholder Return (TSR)?
We have already covered the evolution of MGM China Holdings’ share price, but we should also mention its total shareholder return (TSR). TSR is a yield calculation that takes into account the value of cash dividends (assuming any dividends received have been reinvested) and the calculated value of any capital increase and discounted spin-off. The dividends have been really beneficial to the shareholders of MGM China Holdings, and this cash payment explains why its total shareholder loss of 55%, over the past 5 years, is not as bad as the price performance of the action.
A different perspective
While the broader market gained around 10% last year, shareholders of MGM China Holdings lost 42%. Even good stock prices sometimes drop, but we want to see improvements in the fundamentals of a company, before we get too interested. Unfortunately, last year’s performance may indicate unresolved challenges, given it was worse than the 9% annualized loss over the past five years. We are aware that Baron Rothschild has said that investors should “buy when there is blood in the streets”, but we caution that investors must first ensure that they are buying a high quality business. It is always interesting to follow the evolution of stock prices over the long term. But to better understand MGM China Holdings, there are many other factors that we need to consider. Take risks, for example – MGM China Holdings has 3 warning signs (and 1 which doesn’t suit us very well) we think you should be aware of.
If you like to buy stocks alongside management then you might love this free list of companies. (Hint: insiders bought them).
Please note that the market returns quoted in this article reflect the market-weighted average returns of stocks currently traded on the Hong Kong stock exchanges.
This Simply Wall St article is general in nature. We provide commentary based on historical data and analyst forecasts using only unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell shares and does not take into account your goals or your financial situation. Our aim is to bring you long-term, targeted analysis based on fundamental data. Note that our analysis may not take into account the latest announcements from price sensitive companies or qualitative documents. Simply Wall St has no position in any of the stocks mentioned.
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