Far East Hotels and Entertainment (HKG:37) pulls back 11% this week, but still delivers shareholders incredible 89% CAGR over 3 years

Far East Hotels and Entertainment Limited (HKG:37) shareholders might be concerned after seeing the share price drop 24% in the last quarter. But over three years the performance has been really wonderful. The longer term view reveals that the share price is up 580% in that period. So the recent fall doesn't do much to dampen our respect for the business. The share price action could signify that the business itself is dramatically improved, in that time. It really delights us to see such great share price performance for investors.

While this past week has detracted from the company's three-year return, let's look at the recent trends of the underlying business and see if the gains have been in alignment.

Check out our latest analysis for Far East Hotels and Entertainment

Because Far East Hotels and Entertainment made a loss in the last twelve months, we think the market is probably more focussed on revenue and revenue growth, at least for now. When a company doesn't make profits, we'd generally expect to see good revenue growth. That's because fast revenue growth can be easily extrapolated to forecast profits, often of considerable size.

Far East Hotels and Entertainment actually saw its revenue drop by 5.5% per year over three years. So it's pretty amazing to see the stock price has zoomed up 89% per year in that time. This clear lack of correlation between revenue and share price is surprising to see in a money losing company. At the risk of upsetting holders, this does suggest that hope for a better future is playing a significant role in the share price action.

The image below shows how earnings and revenue have tracked over time (if you click on the image you can see greater detail).

It's probably worth noting we've seen significant insider buying in the last quarter, which we consider a positive. That said, we think earnings and revenue growth trends are even more important factors to consider. This free interactive report on Far East Hotels and Entertainment's earnings, revenue and cash flow is a great place to start, if you want to investigate the stock further.

A Different Perspective

It's good to see that Far East Hotels and Entertainment has rewarded shareholders with a total shareholder return of 71% in the last twelve months. That's better than the annualised return of 29% over half a decade, implying that the company is doing better recently. Given the share price momentum remains strong, it might be worth taking a closer look at the stock, lest you miss an opportunity. It's always interesting to track share price performance over the longer term. But to understand Far East Hotels and Entertainment better, we need to consider many other factors. Case in point: We've spotted 2 warning signs for Far East Hotels and Entertainment you should be aware of.

If you like to buy stocks alongside management, then you might just love this free list of companies. (Hint: insiders have been buying them).

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.