The truth is that if you invest for long enough, you're going to end up with some losing stocks. But the long term shareholders of AirAsia Group Berhad (KLSE:AIRASIA) have had an unfortunate run in the last three years. Sadly for them, the share price is down 72% in that time. More recently, the share price has dropped a further 31% in a month. This could be related to the recent financial results - you can catch up on the most recent data by reading our company report.
With the stock having lost 7.7% in the past week, it's worth taking a look at business performance and seeing if there's any red flags.
Given that AirAsia Group 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. 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.
In the last three years AirAsia Group Berhad saw its revenue shrink by 53% per year. That means its revenue trend is very weak compared to other loss making companies. And as you might expect the share price has been weak too, dropping at a rate of 20% per year. We prefer leave it to clowns to try to catch falling knives, like this stock. It's worth remembering that investors call buying a steeply falling share price 'catching a falling knife' because it is a dangerous pass time.
The image below shows how earnings and revenue have tracked over time (if you click on the image you can see greater detail).
AirAsia Group Berhad is a well known stock, with plenty of analyst coverage, suggesting some visibility into future growth. If you are thinking of buying or selling AirAsia Group Berhad stock, you should check out this free report showing analyst consensus estimates for future profits.
What about the Total Shareholder Return (TSR)?
Investors should note that there's a difference between AirAsia Group Berhad's total shareholder return (TSR) and its share price change, which we've covered above. The TSR attempts to capture the value of dividends (as if they were reinvested) as well as any spin-offs or discounted capital raisings offered to shareholders. Dividends have been really beneficial for AirAsia Group Berhad shareholders, and that cash payout explains why its total shareholder loss of 57%, over the last 3 years, isn't as bad as the share price return.
A Different Perspective
We regret to report that AirAsia Group Berhad shareholders are down 14% for the year. Unfortunately, that's worse than the broader market decline of 4.5%. Having said that, it's inevitable that some stocks will be oversold in a falling market. The key is to keep your eyes on the fundamental developments. Unfortunately, last year's performance may indicate unresolved challenges, given that it was worse than the annualised loss of 7% over the last half decade. 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. 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. To that end, you should learn about the 4 warning signs we've spotted with AirAsia Group Berhad (including 1 which shouldn't be ignored) .
For those who like to find winning investments this free list of growing companies with recent insider purchasing, could be just the ticket.
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. 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.