It is doubtless a positive to see that the Digital Domain Holdings Limited (HKG:547) share price has gained some 104% in the last three months. But that doesn't change the fact that the returns over the last half decade have been disappointing. In fact, the share price has declined rather badly, down some 57% in that time. So we're not so sure if the recent bounce should be celebrated. We'd err towards caution given the long term under-performance.
While the last five years has been tough for Digital Domain Holdings shareholders, this past week has shown signs of promise. So let's look at the longer term fundamentals and see if they've been the driver of the negative returns.
View our latest analysis for Digital Domain Holdings
Given that Digital Domain Holdings 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. Shareholders of unprofitable companies usually expect strong revenue growth. 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 five years, Digital Domain Holdings grew its revenue at 12% per year. That's a pretty good rate for a long time period. The share price, meanwhile, has fallen 10% compounded, over five years. It seems probably that the business has failed to live up to initial expectations. That could lead to an opportunity if the company is going to become profitable sooner rather than later.
You can see how earnings and revenue have changed over time in the image below (click on the chart to see the exact values).
It's probably worth noting we've seen significant insider buying in the last quarter, which we consider a positive. On the other hand, we think the revenue and earnings trends are much more meaningful measures of the business. It might be well worthwhile taking a look at our free report on Digital Domain Holdings' earnings, revenue and cash flow.
A Different Perspective
We're pleased to report that Digital Domain Holdings shareholders have received a total shareholder return of 25% over one year. That certainly beats the loss of about 10% per year over the last half decade. The long term loss makes us cautious, but the short term TSR gain certainly hints at a brighter future. I find it very interesting to look at share price over the long term as a proxy for business performance. But to truly gain insight, we need to consider other information, too. For instance, we've identified 2 warning signs for Digital Domain Holdings that you should be aware of.
Digital Domain Holdings is not the only stock insiders are buying. So take a peek at this free list of growing companies with insider buying.
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.