For many investors, the main point of stock picking is to generate higher returns than the overall market. But if you try your hand at stock picking, you risk returning less than the market. We regret to report that long term Mandarin Oriental International Limited (SGX:M04) shareholders have had that experience, with the share price dropping 22% in three years, versus a market decline of about 17%. Unfortunately the share price momentum is still quite negative, with prices down 10% in thirty days.
If the past week is anything to go by, investor sentiment for Mandarin Oriental International isn't positive, so let's see if there's a mismatch between fundamentals and the share price.
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Because Mandarin Oriental International made a loss in the last twelve months, we think the market is probably more focussed on revenue and revenue growth, at least for now. Shareholders of unprofitable companies usually desire strong revenue growth. Some companies are willing to postpone profitability to grow revenue faster, but in that case one would hope for good top-line growth to make up for the lack of earnings.
Over three years, Mandarin Oriental International grew revenue at 15% per year. That's a fairly respectable growth rate. Shareholders have seen the share price fall at 7% per year, for three years. This implies the market had higher expectations of Mandarin Oriental International. However, that's in the past now, and it's the future is more important - and the future looks brighter (based on revenue, anyway).
The company's revenue and earnings (over time) are depicted in the image below (click to see the exact numbers).
Take a more thorough look at Mandarin Oriental International's financial health with this free report on its balance sheet .
What About Dividends?
When looking at investment returns, it is important to consider the difference between total shareholder return (TSR) and share price return. Whereas the share price return only reflects the change in the share price, the TSR includes the value of dividends (assuming they were reinvested) and the benefit of any discounted capital raising or spin-off. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. In the case of Mandarin Oriental International, it has a TSR of -17% for the last 3 years. That exceeds its share price return that we previously mentioned. And there's no prize for guessing that the dividend payments largely explain the divergence!
A Different Perspective
Mandarin Oriental International shareholders are down 0.7% for the year (even including dividends), but the market itself is up 21%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. Longer term investors wouldn't be so upset, since they would have made 5%, each year, over five years. It could be that the recent sell-off is an opportunity, so it may be worth checking the fundamental data for signs of a long term growth trend. It's always interesting to track share price performance over the longer term. But to understand Mandarin Oriental International better, we need to consider many other factors. Take risks, for example - Mandarin Oriental International has 1 warning sign we think you should be aware of.
Of course, you might find a fantastic investment by looking elsewhere. So take a peek at this free list of companies we expect will grow earnings.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on Singaporean 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.
