Madison Holdings Group's (HKG:8057) Shareholders Are Down 85% On Their Shares

Madison Holdings Group Limited (HKG:8057) shareholders will doubtless be very grateful to see the share price up 410% in the last month. But that is meagre solace in the face of the shocking decline over three years. Indeed, the share price is down a whopping 85% in the last three years. So it's about time shareholders saw some gains. Only time will tell if the company can sustain the turnaround.

We really hope anyone holding through that price crash has a diversified portfolio. Even when you lose money, you don't have to lose the lesson.

See our latest analysis for Madison Holdings Group

In his essay The Superinvestors of Graham-and-Doddsville Warren Buffett described how share prices do not always rationally reflect the value of a business. By comparing earnings per share (EPS) and share price changes over time, we can get a feel for how investor attitudes to a company have morphed over time.

During five years of share price growth, Madison Holdings Group moved from a loss to profitability. We would usually expect to see the share price rise as a result. So it's worth looking at other metrics to try to understand the share price move.

We think that the revenue decline over three years, at a rate of 8.5% per year, probably had some shareholders looking to sell. And that's not surprising, since it seems unlikely that EPS growth can continue for long in the absence of revenue growth.

The company's revenue and earnings (over time) are depicted in the image below (click to see the exact numbers).

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 Madison Holdings Group's earnings, revenue and cash flow.

A Different Perspective

It's nice to see that Madison Holdings Group shareholders have received a total shareholder return of 25% over the last year. There's no doubt those recent returns are much better than the TSR loss of 12% per year over five years. This makes us a little wary, but the business might have turned around its fortunes. It's always interesting to track share price performance over the longer term. But to understand Madison Holdings Group better, we need to consider many other factors. Case in point: We've spotted 3 warning signs for Madison Holdings Group you should be aware of.

Madison Holdings Group is not the only stock that insiders are buying. For those who like to find winning investments this free list of growing companies with recent insider purchasing, could be just the ticket.

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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