Studio City International Holdings Limited (NYSE:MSC) shareholders will doubtless be very grateful to see the share price up 34% in the last month. But over the last three years we've seen a quite serious decline. Indeed, the share price is down a tragic 64% in the last three years. So the improvement may be a real relief to some. After all, could be that the fall was overdone.
While the stock has risen 25% in the past week but long term shareholders are still in the red, let's see what the fundamentals can tell us.
Because Studio City International Holdings made a loss in the last twelve months, we think the market is probably more focussed on revenue and revenue growth, at least for now. 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 Studio City International Holdings saw its revenue shrink by 67% per year. That's definitely a weaker result than most pre-profit companies report. Arguably, the market has responded appropriately to this business performance by sending the share price down 18% (annualized) in the same time period. Bagholders or 'baggies' are people who buy more of a stock as the price collapses. They are then left 'holding the bag' if the shares turn out to be worthless. After losing money on a declining business with falling stock price, we always consider whether eager bagholders are still offering us a reasonable exit price.
The company's revenue and earnings (over time) are depicted in the image below (click to see the exact numbers).
This free interactive report on Studio City International Holdings' balance sheet strength is a great place to start, if you want to investigate the stock further.
A Different Perspective
Over the last year, Studio City International Holdings shareholders took a loss of 57%. In contrast the market gained about 4.7%. Of course the long term matters more than the short term, and even great stocks will sometimes have a poor year. Shareholders have lost 18% per year over the last three years, so the share price drop has become steeper, over the last year; a potential symptom of as yet unsolved challenges. We would be wary of buying into a company with unsolved problems, although some investors will buy into struggling stocks if they believe the price is sufficiently attractive. 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. Consider for instance, the ever-present spectre of investment risk. We've identified 2 warning signs with Studio City International Holdings , and understanding them should be part of your investment process.
We will like Studio City International Holdings better if we see some big insider buys. While we wait, check out this free list of growing companies with considerable, recent, insider buying.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on US 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.