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Generally speaking long term investing is the way to go. But unfortunately, some companies simply don't succeed. For example, after five long years the Travel Expert (Asia) Enterprises Limited (HKG:1235) share price is a whole 60% lower. We certainly feel for shareholders who bought near the top. And we doubt long term believers are the only worried holders, since the stock price has declined 30% over the last twelve months.
Because Travel Expert (Asia) Enterprises is loss-making, we think the market is probably more focussed on revenue and revenue growth, at least for now. Shareholders of unprofitable companies usually expect strong revenue growth. Some companies are willing to postpone profitability to grow revenue faster, but in that case one does expect good top-line growth.
Over half a decade Travel Expert (Asia) Enterprises reduced its trailing twelve month revenue by 0.009% for each year. That's not what investors generally want to see. With neither profit nor revenue growth, the loss of 17% per year doesn't really surprise us. The chance of imminent investor enthusiasm for this stock seems slimmer than Louise Brooks. Ultimately, it may be worth watching - should revenue pick up, the share price might follow.
The chart below shows how revenue and earnings have changed with time, (if you click on the chart you can see the actual values).
We're pleased to report that the CEO is remunerated more modestly than most CEOs at similarly capitalized companies. It's always worth keeping an eye on CEO pay, but a more important question is whether the company will grow earnings throughout the years. Before buying or selling a stock, we always recommend a close examination of historic growth trends, available here..
What About Dividends?
When looking at investment returns, it is important to consider the difference between total shareholder return (TSR) and share price return. The TSR is a return calculation that accounts for the value of cash dividends (assuming that any dividend received was reinvested) and the calculated value of any discounted capital raisings and spin-offs. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. As it happens, Travel Expert (Asia) Enterprises's TSR for the last 5 years was -50%, which exceeds the share price return mentioned earlier. The dividends paid by the company have thusly boosted the total shareholder return.
A Different Perspective
While the broader market lost about 0.2% in the twelve months, Travel Expert (Asia) Enterprises shareholders did even worse, losing 28% (even including dividends). However, it could simply be that the share price has been impacted by broader market jitters. It might be worth keeping an eye on the fundamentals, in case there's a good opportunity. Unfortunately, last year's performance may indicate unresolved challenges, given that it was worse than the annualised loss of 13% 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. Before spending more time on Travel Expert (Asia) Enterprises it might be wise to click here to see if insiders have been buying or selling shares.
Of course Travel Expert (Asia) Enterprises 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 HK 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 email@example.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.