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Melco International Development Limited (HKG:200) shareholders have seen the share price descend 14% over the month. But over three years, the returns would have left most investors smiling After all, the share price is up a market-beating 57% in that time.
View our latest analysis for Melco International Development
While the efficient markets hypothesis continues to be taught by some, it has been proven that markets are over-reactive dynamic systems, and investors are not always rational. By comparing earnings per share (EPS) and share price changes over time, we can get a feel for how investor attitudes to a company have morphed over time.
Over the last three years, Melco International Development failed to grow earnings per share, which fell 60% (annualized).
This means it's unlikely the market is judging the company based on earnings growth. Since the change in EPS doesn't seem to correlate with the change in share price, it's worth taking a look at other metrics.
Languishing at just 0.4%, we doubt the dividend is doing much to prop up the share price. It could be that the revenue growth of 30% per year is viewed as evidence that Melco International Development is growing. If the company is being managed for the long term good, today's shareholders might be right to hold on.
The image below shows how earnings and revenue have tracked over time (if you click on the image you can see greater detail).
This free interactive report on Melco International Development'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)?
We'd be remiss not to mention the difference between Melco International Development's total shareholder return (TSR) and its share price return. Arguably the TSR is a more complete return calculation because it accounts for the value of dividends (as if they were reinvested), along with the hypothetical value of any discounted capital that have been offered to shareholders. Melco International Development's TSR of 59% for the 3 years exceeded its share price return, because it has paid dividends.
A Different Perspective
We're pleased to report that Melco International Development shareholders have received a total shareholder return of 4.6% over one year. Of course, that includes the dividend. Since the one-year TSR is better than the five-year TSR (the latter coming in at 4.0% per year), it would seem that the stock's performance has improved in recent times. In the best case scenario, this may hint at some real business momentum, implying that now could be a great time to delve deeper. 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 1 warning sign for Melco International Development that you should be aware of.