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We think intelligent long term investing is the way to go. But that doesn't mean long term investors can avoid big losses. For example the Cheetah Mobile Inc. (NYSE:CMCM) share price dropped 79% over five years. That is extremely sub-optimal, to say the least. Even worse, it's down 24% in about a month, which isn't fun at all.
Since Cheetah Mobile has shed US$17m from its value in the past 7 days, let's see if the longer term decline has been driven by the business' economics.
View our latest analysis for Cheetah Mobile
Cheetah Mobile wasn't profitable in the last twelve months, 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. Shareholders of unprofitable companies usually desire strong revenue growth. As you can imagine, fast revenue growth, when maintained, often leads to fast profit growth.
Over half a decade Cheetah Mobile reduced its trailing twelve month revenue by 45% for each year. That puts it in an unattractive cohort, to put it mildly. So it's not altogether surprising to see the share price down 12% per year in the same time period. We don't think this is a particularly promising picture. Ironically, that behavior could create an opportunity for the contrarian investor - but only if there are good reasons to predict a brighter future.
The graphic below depicts how earnings and revenue have changed over time (unveil the exact values by clicking on the image).
This free interactive report on Cheetah Mobile's balance sheet strength is a great place to start, if you want to investigate the stock further.
What About The Total Shareholder Return (TSR)?
Investors should note that there's a difference between Cheetah Mobile's total shareholder return (TSR) and its share price change, which we've covered above. The TSR is a return calculation that accounts for the value of cash dividends (assuming that any dividend received was reinvested) and the calculated value of any discounted capital raisings and spin-offs. Cheetah Mobile hasn't been paying dividends, but its TSR of -60% exceeds its share price return of -79%, implying it has either spun-off a business, or raised capital at a discount; thereby providing additional value to shareholders.
A Different Perspective
It's nice to see that Cheetah Mobile shareholders have received a total shareholder return of 56% over the last year. Notably the five-year annualised TSR loss of 10% per year compares very unfavourably with the recent share price performance. 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. To that end, you should learn about the 3 warning signs we've spotted with Cheetah Mobile (including 1 which is a bit unpleasant) .