Paradise Entertainment Limited (HKG:1180) shareholders should be happy to see the share price up 10% in the last week. But if you look at the last five years the returns have not been good. You would have done a lot better buying an index fund, since the stock has dropped 42% in that half decade.
On a more encouraging note the company has added HK$95m to its market cap in just the last 7 days, so let's see if we can determine what's driven the five-year loss for shareholders.
Paradise Entertainment isn't currently profitable, so most analysts would look to revenue growth to get an idea of how fast the underlying business is growing. Shareholders of unprofitable companies usually expect strong revenue growth. As you can imagine, fast revenue growth, when maintained, often leads to fast profit growth.
Over half a decade Paradise Entertainment reduced its trailing twelve month revenue by 13% for each year. That puts it in an unattractive cohort, to put it mildly. On the face of it we'd posit the share price fall of 7% compound, over five years is well justified by the fundamental deterioration. This loss means the stock shareholders are probably pretty annoyed. It is possible for businesses to bounce back but as Buffett says, 'turnarounds seldom turn'.
The company's revenue and earnings (over time) are depicted in the image below (click to see the exact numbers).
You can see how its balance sheet has strengthened (or weakened) over time in this free interactive graphic.
A Different Perspective
It's good to see that Paradise Entertainment has rewarded shareholders with a total shareholder return of 6.6% in the last twelve months. That certainly beats the loss of about 7% per year over the last half decade. This makes us a little wary, but the business might have turned around its fortunes. You might want to assess this data-rich visualization of its earnings, revenue and cash flow.
Of course Paradise Entertainment may not be the best stock to buy. So you may wish to see this free collection of growth stocks.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on HK exchanges.
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.
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