Should DreamEast Group (HKG:593) Be Disappointed With Their 49% Profit?

DreamEast Group Limited (HKG:593) shareholders might be concerned after seeing the share price drop 18% in the last quarter. On the bright side the returns have been quite good over the last half decade. It has returned a market beating 49% in that time. Unfortunately not all shareholders will have held it for the long term, so spare a thought for those caught in the 35% decline over the last twelve months.

View our latest analysis for DreamEast Group

Given that DreamEast Group 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. Generally speaking, companies without profits are expected to grow revenue every year, and at a good clip. That’s because it’s hard to be confident a company will be sustainable if revenue growth is negligible, and it never makes a profit.

For the last half decade, DreamEast Group can boast revenue growth at a rate of 25% per year. Even measured against other revenue-focussed companies, that’s a good result. It’s good to see that the stock has 8.4%, but not entirely surprising given revenue shows strong growth. If you think there could be more growth to come, now might be the time to take a close look at DreamEast Group. Of course, you’ll have to research the business more fully to figure out if this is an attractive opportunity.

The graphic below depicts how earnings and revenue have changed over time.

SEHK:593 Income Statement, October 15th 2019
SEHK:593 Income Statement, October 15th 2019

It’s probably worth noting that the CEO is paid less than the median at similar sized companies. But while CEO remuneration is always worth checking, the really important question is whether the company can grow earnings going forward. Before buying or selling a stock, we always recommend a close examination of historic growth trends, available here..

A Different Perspective

Investors in DreamEast Group had a tough year, with a total loss of 35%, against a market gain of about 2.3%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. Longer term investors wouldn’t be so upset, since they would have made 8.4%, each year, over five years. If the fundamental data continues to indicate long term sustainable growth, the current sell-off could be an opportunity worth considering. You might want to assess this data-rich visualization of its earnings, revenue and cash flow.

We will like DreamEast Group better if we see some big insider buys. While we wait, check out this free list of growing companies 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 HK exchanges.

We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned. Thank you for reading.