Strong week for Magnificent Hotel Investments (HKG:201) shareholders doesn't alleviate pain of five-year loss

Over the last month the Magnificent Hotel Investments Limited (HKG:201) has been much stronger than before, rebounding by 50%. 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 42%, which falls well short of the return you could get by buying an index fund.

On a more encouraging note the company has added HK$233m 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.

View our latest analysis for Magnificent Hotel Investments

Given that Magnificent Hotel Investments didn't make a profit in the last twelve months, we'll focus on revenue growth to form a quick view of its business development. Shareholders of unprofitable companies usually desire strong revenue growth. That's because fast revenue growth can be easily extrapolated to forecast profits, often of considerable size.

Over half a decade Magnificent Hotel Investments reduced its trailing twelve month revenue by 4.6% for each year. While far from catastrophic that is not good. The share price decline at a rate of 7% per year is disappointing. Unfortunately, though, it makes sense given the lack of either profits or revenue growth. It might be worth watching for signs of a turnaround - buyers are probably expecting one.

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

If you are thinking of buying or selling Magnificent Hotel Investments stock, you should check out this FREE detailed report on its balance sheet.

What About The Total Shareholder Return (TSR)?

Investors should note that there's a difference between Magnificent Hotel Investments' total shareholder return (TSR) and its share price change, which we've covered above. The TSR attempts to capture the value of dividends (as if they were reinvested) as well as any spin-offs or discounted capital raisings offered to shareholders. Magnificent Hotel Investments' TSR of was a loss of 39% for the 5 years. That wasn't as bad as its share price return, because it has paid dividends.

A Different Perspective

Magnificent Hotel Investments shareholders are down 20% for the year, but the market itself is up 6.5%. 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. Regrettably, last year's performance caps off a bad run, with the shareholders facing a total loss of 7% per year over five years. 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. I find it very interesting to look at share price over the long term as a proxy for business performance. But to truly gain insight, we need to consider other information, too. To that end, you should be aware of the 1 warning sign we've spotted with Magnificent Hotel Investments .

But note: Magnificent Hotel Investments may not be the best stock to buy. So take a peek at this free list of interesting companies with past earnings growth (and further growth forecast).

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.