This week we saw the Muhibbah Engineering (M) Bhd. (KLSE:MUHIBAH) share price climb by 11%. But that doesn't change the fact that the returns over the last three years have been disappointing. Tragically, the share price declined 65% in that time. So the improvement may be a real relief to some. After all, could be that the fall was overdone.
Although the past week has been more reassuring for shareholders, they're still in the red over the last three years, so let's see if the underlying business has been responsible for the decline.
Muhibbah Engineering (M) Bhd isn't currently profitable, so most analysts would look to revenue growth to get an idea of how fast the underlying business is growing. 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.
Over the last three years, Muhibbah Engineering (M) Bhd's revenue dropped 9.4% per year. That's not what investors generally want to see. The share price decline of 18% compound, over three years, is understandable given the company doesn't have profits to boast of, and revenue is moving in the wrong direction. Having said that, if growth is coming in the future, now may be the low ebb for the company. We don't generally like to own companies that lose money and can't grow revenues. But any company is worth looking at when it makes a maiden profit.
You can see how earnings and revenue have changed over time in the image below (click on the chart to see the exact values).
Balance sheet strength is crucial. It might be well worthwhile taking a look at our free report on how its financial position has changed over time.
What about the Total Shareholder Return (TSR)?
We'd be remiss not to mention the difference between Muhibbah Engineering (M) Bhd's total shareholder return (TSR) and its share price return. Arguably the TSR is a more complete return calculation because it accounts for the value of dividends (as if they were reinvested), along with the hypothetical value of any discounted capital that have been offered to shareholders. Its history of dividend payouts mean that Muhibbah Engineering (M) Bhd's TSR, which was a 63% drop over the last 3 years, was not as bad as the share price return.
A Different Perspective
We're pleased to report that Muhibbah Engineering (M) Bhd shareholders have received a total shareholder return of 35% over one year. Notably the five-year annualised TSR loss of 9% per year compares very unfavourably with the recent share price performance. The long term loss makes us cautious, but the short term TSR gain certainly hints at a brighter future. It's always interesting to track share price performance over the longer term. But to understand Muhibbah Engineering (M) Bhd better, we need to consider many other factors. Consider for instance, the ever-present spectre of investment risk. We've identified 1 warning sign with Muhibbah Engineering (M) Bhd , and understanding them should be part of your investment process.
Of course, you might find a fantastic investment by looking elsewhere. So take a peek at this free list of companies we expect will grow earnings.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on MY exchanges.
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.
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