Further weakness as Pegasus International Holdings (HKG:676) drops 12% this week, taking five-year losses to 13%

While it may not be enough for some shareholders, we think it is good to see the Pegasus International Holdings Limited (HKG:676) share price up 11% in a single quarter. But that doesn't change the fact that the returns over the last five years have been less than pleasing. In fact, the share price is down 17%, which falls well short of the return you could get by buying an index fund.

Since Pegasus International Holdings has shed HK$80m from its value in the past 7 days, let's see if the longer term decline has been driven by the business' economics.

Check out our latest analysis for Pegasus International Holdings

Pegasus International Holdings recorded just US$6,039,000 in revenue over the last twelve months, which isn't really enough for us to consider it to have a proven product. You have to wonder why venture capitalists aren't funding it. So it seems that the investors focused more on what could be, than paying attention to the current revenues (or lack thereof). It seems likely some shareholders believe that Pegasus International Holdings will significantly advance the business plan before too long.

Companies that lack both meaningful revenue and profits are usually considered high risk. There is almost always a chance they will need to raise more capital, and their progress - and share price - will dictate how dilutive that is to current holders. While some such companies do very well over the long term, others become hyped up by promoters before eventually falling back down to earth, and going bankrupt (or being recapitalized).

Pegasus International Holdings had liabilities exceeding cash by US$9.8m when it last reported in December 2023, according to our data. That puts it in the highest risk category, according to our analysis. But with the share price diving 3% per year, over 5 years , it's probably fair to say that some shareholders no longer believe the company will succeed. You can click on the image below to see (in greater detail) how Pegasus International Holdings' cash levels have changed over time.

In reality it's hard to have much certainty when valuing a business that has neither revenue or profit. Would it bother you if insiders were selling the stock? I would feel more nervous about the company if that were so. It costs nothing but a moment of your time to see if we are picking up on any insider selling.

What About Dividends?

It is important to consider the total shareholder return, as well as the share price return, for any given stock. The TSR is a return calculation that accounts for the value of cash dividends (assuming that any dividend received was reinvested) and the calculated value of any discounted capital raisings and spin-offs. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. We note that for Pegasus International Holdings the TSR over the last 5 years was -13%, which is better than the share price return mentioned above. The dividends paid by the company have thusly boosted the total shareholder return.

A Different Perspective

It's nice to see that Pegasus International Holdings shareholders have received a total shareholder return of 18% over the last year. Of course, that includes the dividend. There's no doubt those recent returns are much better than the TSR loss of 3% per year over five years. The long term loss makes us cautious, but the short term TSR gain certainly hints at a brighter future. While it is well worth considering the different impacts that market conditions can have on the share price, there are other factors that are even more important. Take risks, for example - Pegasus International Holdings has 4 warning signs we think you should be aware of.

If you would prefer to check out another company -- one with potentially superior financials -- then do not miss this free list of companies that have proven they can grow earnings.

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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com