MGM China Holdings (HKG:2282) pulls back 3.8% this week, but still delivers shareholders splendid 27% CAGR over 3 years

It might be of some concern to shareholders to see the MGM China Holdings Limited (HKG:2282) share price down 23% in the last month. But over three years, the returns would have left most investors smiling To wit, the share price did better than an index fund, climbing 92% during that period.

Although MGM China Holdings has shed HK$1.5b from its market cap this week, let's take a look at its longer term fundamental trends and see if they've driven returns.

See our latest analysis for MGM China Holdings

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. One way to examine how market sentiment has changed over time is to look at the interaction between a company's share price and its earnings per share (EPS).

MGM China Holdings became profitable within the last three years. So we would expect a higher share price over the period.

The image below shows how EPS has tracked over time (if you click on the image you can see greater detail).

We know that MGM China Holdings has improved its bottom line over the last three years, but what does the future have in store? This free interactive report on MGM China Holdings' balance sheet strength is a great place to start, if you want to investigate the stock further.

What About Dividends?

When looking at investment returns, it is important to consider the difference between total shareholder return (TSR) and share price return. 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. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. As it happens, MGM China Holdings' TSR for the last 3 years was 104%, which exceeds the share price return mentioned earlier. And there's no prize for guessing that the dividend payments largely explain the divergence!

A Different Perspective

MGM China Holdings provided a TSR of 3.8% over the last twelve months. But that was short of the market average. On the bright side, that's still a gain, and it is certainly better than the yearly loss of about 2% endured over half a decade. It could well be that the business is stabilizing. 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. For instance, we've identified 2 warning signs for MGM China Holdings (1 shouldn't be ignored) that you should be aware of.

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.