Long term investing is the way to go, but that doesn't mean you should hold every stock forever. We don't wish catastrophic capital loss on anyone. For example, we sympathize with anyone who was caught holding Eco World International Berhad (KLSE:EWINT) during the five years that saw its share price drop a whopping 75%. And it's not just long term holders hurting, because the stock is down 46% in the last year. The falls have accelerated recently, with the share price down 21% in the last three months.
Since shareholders are down over the longer term, lets look at the underlying fundamentals over the that time and see if they've been consistent with returns.
Check out our latest analysis for Eco World International Berhad
Eco World International Berhad 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. That's because fast revenue growth can be easily extrapolated to forecast profits, often of considerable size.
In the last half decade, Eco World International Berhad saw its revenue increase by 55% per year. That's well above most other pre-profit companies. So on the face of it we're really surprised to see the share price has averaged a fall of 12% each year, in the same time period. It could be that the stock was over-hyped before. We'd recommend carefully checking for indications of future growth - and balance sheet threats - before considering a purchase.
The company's revenue and earnings (over time) are depicted in the image below (click to see the exact numbers).
This free interactive report on Eco World International Berhad's balance sheet strength is a great place to start, if you want to investigate the stock further.
What About Dividends?
It is important to consider the total shareholder return, as well as the share price return, for any given stock. 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. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. As it happens, Eco World International Berhad's TSR for the last 5 years was -73%, which exceeds the share price return mentioned earlier. The dividends paid by the company have thusly boosted the total shareholder return.
A Different Perspective
While the broader market lost about 7.0% in the twelve months, Eco World International Berhad shareholders did even worse, losing 46% (even including dividends). However, it could simply be that the share price has been impacted by broader market jitters. It might be worth keeping an eye on the fundamentals, in case there's a good opportunity. Regrettably, last year's performance caps off a bad run, with the shareholders facing a total loss of 12% per year over five years. We realise that Baron Rothschild has said investors should "buy when there is blood on the streets", but we caution that investors should first be sure they are buying a high quality business. While it is well worth considering the different impacts that market conditions can have on the share price, there are other factors that are even more important. To that end, you should be aware of the 2 warning signs we've spotted with Eco World International Berhad .