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Some stocks are best avoided. We really hate to see fellow investors lose their hard-earned money. For example, we sympathize with anyone who was caught holding Media Chinese International Limited (HKG:685) during the five years that saw its share price drop a whopping 86%. And it's not just long term holders hurting, because the stock is down 37% in the last year. Shareholders have had an even rougher run lately, with the share price down 24% in the last 90 days. This could be related to the recent financial results - you can catch up on the most recent data by reading our company report.
While a drop like that is definitely a body blow, money isn't as important as health and happiness.
Check out our latest analysis for Media Chinese International
Media Chinese International isn't currently profitable, so most analysts would look to revenue growth to get an idea of how fast the underlying business is growing. When a company doesn't make profits, we'd generally expect to see good 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 half a decade Media Chinese International reduced its trailing twelve month revenue by 11% for each year. That puts it in an unattractive cohort, to put it mildly. So it's not that strange that the share price dropped 33% per year in that 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 image below shows how earnings and revenue have tracked over time (if you click on the image you can see greater detail).
We consider it positive that insiders have made significant purchases in the last year. Even so, future earnings will be far more important to whether current shareholders make money. You can see what analysts are predicting for Media Chinese International in this interactive graph of future profit estimates.
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 incorporates the value of any spin-offs or discounted capital raisings, along with any dividends, based on the assumption that the dividends are reinvested. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. In the case of Media Chinese International, it has a TSR of -82% for the last 5 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!