MGM China Holdings (HKG:2282) pulls back 10% this week, but still delivers shareholders respectable 22% CAGR over 3 years

MGM China Holdings Limited (HKG:2282) shareholders might be concerned after seeing the share price drop 10% in the last week. But that shouldn't obscure the pleasing returns achieved by shareholders over the last three years. In the last three years the share price is up, 70%: better than the market.

Since the long term performance has been good but there's been a recent pullback of 10%, let's check if the fundamentals match the share price.

View our latest analysis for MGM China Holdings

To paraphrase Benjamin Graham: Over the short term the market is a voting machine, but over the long term it's a weighing machine. 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.

MGM China Holdings became profitable within the last three years. That would generally be considered a positive, so we'd expect the share price to be up.

You can see how EPS has changed over time in the image below (click on the chart to see the exact values).

We know that MGM China Holdings has improved its bottom line over the last three years, but what does the future have in store? Take a more thorough look at MGM China Holdings' financial health with this free report on its balance sheet.

What About Dividends?

As well as measuring the share price return, investors should also consider the total shareholder return (TSR). The TSR incorporates the value of any spin-offs or discounted capital raisings, along with any dividends, based on the assumption that the dividends are reinvested. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. In the case of MGM China Holdings, it has a TSR of 81% for the last 3 years. That exceeds its share price return that we previously mentioned. This is largely a result of its dividend payments!

A Different Perspective

Investors in MGM China Holdings had a tough year, with a total loss of 7.1% (including dividends), against a market gain of about 33%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. Unfortunately, last year's performance may indicate unresolved challenges, given that it was worse than the annualised loss of 2% 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 MGM China Holdings better, we need to consider many other factors. Consider for instance, the ever-present spectre of investment risk. We've identified 2 warning signs with MGM China Holdings (at least 1 which is concerning) , and understanding them should be part of your investment process.

We will like MGM China Holdings better if we see some big insider buys. While we wait, check out this free list of undervalued stocks (mostly small caps) with considerable, recent, insider buying.

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.