It is a pleasure to report that the Next Digital Limited (HKG:282) is up 36% in the last quarter. But that doesn't change the fact that the returns over the last half decade have been disappointing. In fact, the share price has declined rather badly, down some 62% in that time. So we're hesitant to put much weight behind the short term increase. Of course, this could be the start of a turnaround.
View our latest analysis for Next Digital
Given that Next Digital didn't make a profit in the last twelve months, we'll focus on revenue growth to form a quick view of its business development. Shareholders of unprofitable companies usually expect strong revenue growth. As you can imagine, fast revenue growth, when maintained, often leads to fast profit growth.
In the last five years Next Digital saw its revenue shrink by 20% per year. That's definitely a weaker result than most pre-profit companies report. Arguably, the market has responded appropriately to this business performance by sending the share price down 17% (annualized) in the same time period. We don't generally like to own companies that lose money and don't grow revenues. You might be better off spending your money on a leisure activity. This looks like a really risky stock to buy, at a glance.
You can see how earnings and revenue have changed over time in the image below (click on the chart to see the exact values).
This free interactive report on Next Digital's balance sheet strength is a great place to start, if you want to investigate the stock further.
A Different Perspective
It's good to see that Next Digital has rewarded shareholders with a total shareholder return of 31% in the last twelve months. Notably the five-year annualised TSR loss of 17% 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. If you would like to research Next Digital in more detail then you might want to take a look at whether insiders have been buying or selling shares in the company.
If you would prefer to check out another company -- one with potentially superior financials -- then do not miss this free list of companies that have proven they can grow earnings.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on HK exchanges.
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.
If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned. Thank you for reading.