Imagine Owning Tye Soon (SGX:BFU) And Trying To Stomach The 72% Share Price Drop

This week we saw the Tye Soon Limited (SGX:BFU) share price climb by 30%. But that can’t change the reality that over the longer term (five years), the returns have been really quite dismal. In that time the share price has delivered a rude shock to holders, who find themselves down 72% after a long stretch. Some might say the recent bounce is to be expected after such a bad drop. But it could be that the fall was overdone.

Check out our latest analysis for Tye Soon

Tye Soon 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. As you can imagine, fast revenue growth, when maintained, often leads to fast profit growth.

In the last half decade, Tye Soon saw its revenue increase by 2.1% per year. That’s far from impressive given all the money it is losing. Nonetheless, it’s fair to say the rapidly declining share price (down 23%, compound, over five years) suggests the market is very disappointed with this level of growth. We’d be pretty cautious about this one, although the sell-off may be too severe. A company like this generally needs to produce profits before it can find favour with new investors.

SGX:BFU Income Statement, September 12th 2019
SGX:BFU Income Statement, September 12th 2019

If you are thinking of buying or selling Tye Soon stock, you should check out this FREE detailed report on its balance sheet.

A Dividend Lost

The value of past dividends are accounted for in the total shareholder return (TSR), but not in the share price return mentioned above. In some ways, TSR is a better measure of how well an investment has performed. Tye Soon’s TSR over the last 5 years is -64%; better than its share price return. Even though the company isn’t paying dividends at the moment, it has done in the past.

A Different Perspective

While the broader market gained around 4.6% in the last year, Tye Soon shareholders lost 38%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. Unfortunately, last year’s performance may indicate unresolved challenges, given that it was worse than the annualised loss of 18% over the last half decade. We realise that Buffett 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 businesses. You might want to assess this data-rich visualization of its earnings, revenue and cash flow.

Of course Tye Soon 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 SG 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.