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Every investor on earth makes bad calls sometimes. But you have a problem if you face massive losses more than once in a while. So spare a thought for the long term shareholders of Huayi Tencent Entertainment Company Limited (HKG:419); the share price is down a whopping 76% in the last three years. That would be a disturbing experience. And over the last year the share price fell 51%, so we doubt many shareholders are delighted. And the share price decline continued over the last week, dropping some 5.1%.
Check out our latest analysis for Huayi Tencent Entertainment
Given that Huayi Tencent Entertainment 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. Generally speaking, companies without profits are expected to grow revenue every year, and at a good clip. That's because fast revenue growth can be easily extrapolated to forecast profits, often of considerable size.
In the last three years, Huayi Tencent Entertainment saw its revenue grow by 5.3% per year, compound. Given it's losing money in pursuit of growth, we are not really impressed with that. Nonetheless, it's fair to say the rapidly declining share price (down 38%, compound, over three years) suggests the market is very disappointed with this level of growth. While we're definitely wary of the stock, after that kind of performance, it could be an over-reaction. Of course, revenue growth is nice but generally speaking the lower the profits, the riskier the business - and this business isn't making steady profits.
You can see how revenue and earnings have changed over time in the image below, (click on the chart to see cashflow).
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 Huayi Tencent Entertainment'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. Huayi Tencent Entertainment hasn't been paying dividends, but its TSR of -76% exceeds its share price return of -76%, implying it has either spun-off a business, or raised capital at a discount; thereby providing additional value to shareholders.
A Different Perspective
While the broader market lost about 2.5% in the twelve months, Huayi Tencent Entertainment shareholders did even worse, losing 51%. Having said that, it's inevitable that some stocks will be oversold in a falling market. The key is to keep your eyes on the fundamental developments. Regrettably, last year's performance caps off a bad run, with the shareholders facing a total loss of 6.7% 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. Shareholders might want to examine this detailed historical graph of past earnings, revenue and cash flow.