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Many investors define successful investing as beating the market average over the long term. But its virtually certain that sometimes you will buy stocks that fall short of the market average returns. We regret to report that long term Golik Holdings Limited (HKG:1118) shareholders have had that experience, with the share price dropping 41% in three years, versus a market return of about 12%. And over the last year the share price fell 23%, so we doubt many shareholders are delighted. Furthermore, it's down 17% in about a quarter. That's not much fun for holders. But this could be related to the weak market, which is down 7.6% in the same period.
Check out our latest analysis for Golik Holdings
Golik Holdings isn't a profitable company, so 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. When a company doesn't make profits, we'd generally expect to see good revenue growth. As you can imagine, fast revenue growth, when maintained, often leads to fast profit growth.
In the last three years, Golik Holdings saw its revenue grow by 13% per year, compound. That's a pretty good rate of top-line growth. Shareholders have seen the share price fall at 16% per year, for three years. This implies the market had higher expectations of Golik Holdings. With revenue growing at a solid clip, now might be the time to focus on the possibility that it will have a brighter future.
The graphic below depicts how earnings and revenue have changed over time (unveil the exact values by clicking on the image).
It's good to see that there was some significant insider buying in the last three months. That's a positive. That said, we think earnings and revenue growth trends are even more important factors to consider. Before buying or selling a stock, we always recommend a close examination of historic growth trends, available here..
A Dividend Lost
The share price return figures discussed above don't include the value of dividends paid previously, but the total shareholder return (TSR) does. By accounting for the value of dividends paid, the TSR can be seen as a more complete measure of the value a company brings to its shareholders. Golik Holdings's TSR over the last 3 years is -33%; better than its share price return. Even though the company isn't paying dividends at the moment, it has done in the past.
A Different Perspective
While the broader market lost about 6.6% in the twelve months, Golik Holdings shareholders did even worse, losing 21%. 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. Unfortunately, last year's performance may indicate unresolved challenges, given that it was worse than the annualised loss of 3.0% over the last half decade. 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 is all well and good that insiders have been buying shares, but we suggest you check here to see what price insiders were buying at.