YGM Trading (HKG:375) Share Prices Have Dropped 56% In The Last Three Years

YGM Trading Limited (HKG:375) shareholders should be happy to see the share price up 22% in the last month. But that doesn't change the fact that the returns over the last three years have been less than pleasing. In fact, the share price is down 56% in the last three years, falling well short of the market return.

View our latest analysis for YGM Trading

YGM Trading isn't currently profitable, so most analysts would look to revenue growth to get an idea of how fast the underlying business is growing. When a company doesn't make profits, we'd generally expect to see good revenue growth. As you can imagine, fast revenue growth, when maintained, often leads to fast profit growth.

Over the last three years, YGM Trading's revenue dropped 38% per year. That means its revenue trend is very weak compared to other loss making companies. Arguably, the market has responded appropriately to this business performance by sending the share price down 16% (annualized) in the same time period. Bagholders or 'baggies' are people who buy more of a stock as the price collapses. They are then left 'holding the bag' if the shares turn out to be worthless. It could be a while before the company repays long suffering shareholders with share price gains.

You can see below how earnings and revenue have changed over time (discover the exact values by clicking on the image).

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

What about the Total Shareholder Return (TSR)?

We'd be remiss not to mention the difference between YGM Trading's total shareholder return (TSR) and its share price return. 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. Dividends have been really beneficial for YGM Trading shareholders, and that cash payout explains why its total shareholder loss of 49%, over the last 3 years, isn't as bad as the share price return.

A Different Perspective

YGM Trading shareholders are down 32% for the year, but the market itself is up 24%. 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. We realise that Baron Rothschild has said investors should "buy when there is blood on the streets", but we caution that investors should first be sure they are buying a high quality business. It's always interesting to track share price performance over the longer term. But to understand YGM Trading better, we need to consider many other factors. For instance, we've identified 1 warning sign for YGM Trading that you should be aware of.

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

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This article by Simply Wall St is general in nature. 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.
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