When you buy shares in a company, there is always a risk that the price drops to zero. But if you pick the right business to buy shares in, you can make more than you can lose. Take, for example MGM China Holdings Limited (HKG:2282). Its share price is already up an impressive 103% in the last twelve months. The last week saw the share price soften some 4.3%. On the other hand, longer term shareholders have had a tougher run, with the stock falling 13% in three years.
Although MGM China Holdings has shed HK$1.6b from its market cap this week, let's take a look at its longer term fundamental trends and see if they've driven returns.
View our latest analysis for MGM China Holdings
MGM China Holdings isn't currently profitable, so most analysts would look to revenue growth to get an idea of how fast the underlying business is growing. Shareholders of unprofitable companies usually expect strong 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 year MGM China Holdings saw its revenue grow by 60%. That's a head and shoulders above most loss-making companies. Meanwhile, the market has paid attention, sending the share price soaring 103% in response. It's great to see strong revenue growth, but the question is whether it can be sustained. The strong share price rise indicates optimism, so there may be a better opportunity for buyers as the hype fades a bit.
The graphic below depicts how earnings and revenue have changed over time (unveil the exact values by clicking on the image).
MGM China Holdings is a well known stock, with plenty of analyst coverage, suggesting some visibility into future growth. Given we have quite a good number of analyst forecasts, it might be well worth checking out this free chart depicting consensus estimates.
A Different Perspective
It's good to see that MGM China Holdings has rewarded shareholders with a total shareholder return of 103% in the last twelve months. That certainly beats the loss of about 4% per year over the last half decade. 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. It's always interesting to track share price performance over the longer term. But to understand MGM China Holdings better, we need to consider many other factors. For example, we've discovered 2 warning signs for MGM China Holdings that you should be aware of before investing here.
If you would prefer to check out another company -- one with potentially superior financials -- then do not miss this free list of companies that have proven they can grow earnings.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on Hong Kong 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.