Stock Analysis

If You Had Bought Malayan Cement Berhad's (KLSE:MCEMENT) Shares Five Years Ago You Would Be Down 77%

KLSE:MCEMENT
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While it may not be enough for some shareholders, we think it is good to see the Malayan Cement Berhad (KLSE:MCEMENT) share price up 15% in a single quarter. But that doesn't change the fact that the returns over the last half decade have been stomach churning. In fact, the share price has tumbled down a mountain to land 77% lower after that period. The recent bounce might mean the long decline is over, but we are not confident. The important question is if the business itself justifies a higher share price in the long term.

View our latest analysis for Malayan Cement Berhad

Given that Malayan Cement Berhad 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. As you can imagine, fast revenue growth, when maintained, often leads to fast profit growth.

Over half a decade Malayan Cement Berhad reduced its trailing twelve month revenue by 8.9% for each year. That's definitely a weaker result than most pre-profit companies report. So it's not that strange that the share price dropped 12% per year in that period. This kind of price performance makes us very wary, especially when combined with falling revenue. Ironically, that behavior could create an opportunity for the contrarian investor - but only if there are good reasons to predict a brighter future.

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

earnings-and-revenue-growth
KLSE:MCEMENT Earnings and Revenue Growth February 1st 2021

Take a more thorough look at Malayan Cement Berhad's financial health with this free report on its balance sheet.

A Different Perspective

Investors in Malayan Cement Berhad had a tough year, with a total loss of 36%, against a market gain of about 7.7%. Even the share prices of good stocks drop sometimes, but we want to see improvements in the fundamental metrics of a business, before getting too interested. Regrettably, last year's performance caps off a bad run, with the shareholders facing a total loss of 12% per year over five years. 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. 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. Case in point: We've spotted 2 warning signs for Malayan Cement Berhad you should be aware of, and 1 of them makes us a bit uncomfortable.

Of course Malayan Cement Berhad may not be the best stock to buy. So you may wish to see this free collection of growth stocks.

Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on MY exchanges.

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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. 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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