Investors in Paragon Globe Berhad (KLSE:PGLOBE) have unfortunately lost 42% over the last three years
Many investors define successful investing as beating the market average over the long term. But in any portfolio, there are likely to be some stocks that fall short of that benchmark. We regret to report that long term Paragon Globe Berhad (KLSE:PGLOBE) shareholders have had that experience, with the share price dropping 80% in three years, versus a market decline of about 9.5%. We really hope anyone holding through that price crash has a diversified portfolio. Even when you lose money, you don't have to lose the lesson.
It's worthwhile assessing if the company's economics have been moving in lockstep with these underwhelming shareholder returns, or if there is some disparity between the two. So let's do just that.
View our latest analysis for Paragon Globe Berhad
Paragon Globe 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. When a company doesn't make profits, we'd generally hope to see good revenue growth. Some companies are willing to postpone profitability to grow revenue faster, but in that case one would hope for good top-line growth to make up for the lack of earnings.
In the last three years, Paragon Globe Berhad saw its revenue grow by 11% per year, compound. That's a pretty good rate of top-line growth. So it's hard to believe the share price decline of 22% per year is due to the revenue. It could be that the losses were much larger than expected. This is exactly why investors need to diversify - even when a loss making company grows revenue, it can fail to deliver for shareholders.
You can see how earnings and revenue have changed over time in the image below (click on the chart to see the exact values).
You can see how its balance sheet has strengthened (or weakened) over time in this free interactive graphic.
What About The Total Shareholder Return (TSR)?
We'd be remiss not to mention the difference between Paragon Globe Berhad's total shareholder return (TSR) and its share price return. Arguably the TSR is a more complete return calculation because it accounts for the value of dividends (as if they were reinvested), along with the hypothetical value of any discounted capital that have been offered to shareholders. Paragon Globe Berhad's TSR of was a loss of 42% for the 3 years. That wasn't as bad as its share price return, because it has paid dividends.
A Different Perspective
It's good to see that Paragon Globe Berhad has rewarded shareholders with a total shareholder return of 38% in the last twelve months. There's no doubt those recent returns are much better than the TSR loss of 6% per year over five years. We generally put more weight on the long term performance over the short term, but the recent improvement could hint at a (positive) inflection point within the 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. Consider for instance, the ever-present spectre of investment risk. We've identified 2 warning signs with Paragon Globe Berhad (at least 1 which is a bit concerning) , and understanding them should be part of your investment process.
If you like to buy stocks alongside management, then you might just love this free list of companies. (Hint: insiders have been buying them).
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on Malaysian 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.
