The past five years for Cheetah Mobile (NYSE:CMCM) investors has not been profitable
Cheetah Mobile Inc. (NYSE:CMCM) shareholders should be happy to see the share price up 17% in the last month. But will that repair the damage for the weary investors who have owned this stock as it declined over half a decade? Probably not. Five years have seen the share price descend precipitously, down a full 95%. It's true that the recent bounce could signal the company is turning over a new leaf, but we are not so sure. The important question is if the business itself justifies a higher share price in the long term. While a drop like that is definitely a body blow, money isn't as important as health and happiness.
So let's have a look and see if the longer term performance of the company has been in line with the underlying business' progress.
View our latest analysis for Cheetah Mobile
Given that Cheetah Mobile 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. Some companies are willing to postpone profitability to grow revenue faster, but in that case one does expect good top-line growth.
In the last five years Cheetah Mobile saw its revenue shrink by 40% per year. That's definitely a weaker result than most pre-profit companies report. So it's not that strange that the share price dropped 14% per year in that period. We don't think this is a particularly promising picture. Of course, the poor performance could mean the market has been too severe selling down. That can happen.
You can see below how earnings and revenue have changed over time (discover the exact values by clicking on the image).
Take a more thorough look at Cheetah Mobile's financial health with this free report on its balance sheet.
What About The Total Shareholder Return (TSR)?
We'd be remiss not to mention the difference between Cheetah Mobile's total shareholder return (TSR) and its share price return. 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. We note that Cheetah Mobile's TSR, at -90% is higher than its share price return of -95%. When you consider it hasn't been paying a dividend, this data suggests shareholders have benefitted from a spin-off, or had the opportunity to acquire attractively priced shares in a discounted capital raising.
A Different Perspective
Investors in Cheetah Mobile had a tough year, with a total loss of 31%, against a market gain of about 18%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. Unfortunately, longer term shareholders are suffering worse, given the loss of 14% doled out over the last five years. We would want clear information suggesting the company will grow, before taking the view that the share price will stabilize. While it is well worth considering the different impacts that market conditions can have on the share price, there are other factors that are even more important. To that end, you should learn about the 3 warning signs we've spotted with Cheetah Mobile (including 1 which can't be ignored) .
We will like Cheetah Mobile 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 American 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.
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