Passive investing in an index fund is a good way to ensure your own returns roughly match the overall market. But if you buy individual stocks, you can do both better or worse than that. That downside risk was realized by MMag Holdings Berhad (KLSE:MMAG) shareholders over the last year, as the share price declined 38%. That falls noticeably short of the market return of around 13%. At least the damage isn't so bad if you look at the last three years, since the stock is down 17% in that time. In the last ninety days we've seen the share price slide 56%. This could be related to the recent financial results - you can catch up on the most recent data by reading our company report.
MMag Holdings Berhad isn't currently profitable, so most analysts would look to revenue growth to get an idea of how fast the underlying business is growing. Shareholders of unprofitable companies usually expect strong revenue growth. That's because fast revenue growth can be easily extrapolated to forecast profits, often of considerable size.
In the last year MMag Holdings Berhad saw its revenue grow by 22%. We think that is pretty nice growth. Unfortunately that wasn't good enough to stop the share price dropping 38%. This implies the market was expecting better growth. But if revenue keeps growing, then at a certain point the share price would likely follow.
The image below shows how earnings and revenue have tracked over time (if you click on the image you can see greater detail).
If you are thinking of buying or selling MMag Holdings Berhad stock, you should check out this FREE detailed report on its balance sheet.
A Different Perspective
MMag Holdings Berhad shareholders are down 38% for the year, but the market itself is up 13%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. Regrettably, last year's performance caps off a bad run, with the shareholders facing a total loss of 4% per year over five years. Generally speaking long term share price weakness can be a bad sign, though contrarian investors might want to research the stock in hope of a turnaround. I find it very interesting to look at share price over the long term as a proxy for business performance. But to truly gain insight, we need to consider other information, too. For example, we've discovered 5 warning signs for MMag Holdings Berhad (3 shouldn't be ignored!) that you should be aware of before investing here.
Of course MMag Holdings 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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