We think intelligent long term investing is the way to go. But no-one is immune from buying too high. To wit, the Shangri-La Hotels (Malaysia) Berhad (KLSE:SHANG) share price managed to fall 60% over five long years. That's an unpleasant experience for long term holders. And we doubt long term believers are the only worried holders, since the stock price has declined 33% over the last twelve months.
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.
Shangri-La Hotels (Malaysia) Berhad wasn't profitable in the last twelve months, it is unlikely we'll see a strong correlation between its share price and its earnings per share (EPS). Arguably revenue is our next best option. Generally speaking, companies without profits are expected to grow revenue every year, and at a good clip. That's because it's hard to be confident a company will be sustainable if revenue growth is negligible, and it never makes a profit.
Over half a decade Shangri-La Hotels (Malaysia) Berhad reduced its trailing twelve month revenue by 13% for each 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 10% (annualized) in the same time period. It's fair to say most investors don't like to invest in loss making companies with falling revenue. This looks like a really risky stock to buy, at a glance.
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've already covered Shangri-La Hotels (Malaysia) Berhad's share price action, but we should also mention its total shareholder return (TSR). 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. Dividends have been really beneficial for Shangri-La Hotels (Malaysia) Berhad shareholders, and that cash payout explains why its total shareholder loss of 58%, over the last 5 years, isn't as bad as the share price return.
A Different Perspective
Shangri-La Hotels (Malaysia) Berhad shareholders are down 33% for the year, but the market itself is up 6.4%. Even the share prices of good stocks drop sometimes, but we want to see improvements in the fundamental metrics of a business, before getting too interested. Regrettably, last year's performance caps off a bad run, with the shareholders facing a total loss of 10% per year over five years. Generally speaking long term share price weakness can be a bad sign, though contrarian investors might want to research the stock in hope of a turnaround. It's always interesting to track share price performance over the longer term. But to understand Shangri-La Hotels (Malaysia) Berhad better, we need to consider many other factors. Take risks, for example - Shangri-La Hotels (Malaysia) Berhad has 1 warning sign we think you should be aware of.
But note: Shangri-La Hotels (Malaysia) Berhad may not be the best stock to buy. So take a peek at this free list of interesting companies with past earnings growth (and further growth forecast).
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.