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Some stocks are best avoided. It hits us in the gut when we see fellow investors suffer a loss. Imagine if you held Macau Legend Development Limited (HKG:1680) for half a decade as the share price tanked 80%.
Check out our latest analysis for Macau Legend Development
There is no denying that markets are sometimes efficient, but prices do not always reflect underlying business performance. One flawed but reasonable way to assess how sentiment around a company has changed is to compare the earnings per share (EPS) with the share price.
During five years of share price growth, Macau Legend Development moved from a loss to profitability. That would generally be considered a positive, so we are surprised to see the share price is down. Other metrics might give us a better handle on how its value is changing over time.
The revenue fall of 0.2% per year for five years is neither good nor terrible. But if the market expected durable top line growth, then that could explain the share price weakness.
The chart below shows how revenue and earnings have changed with time, (if you click on the chart you can see the actual values).
It’s good to see that there was some significant insider buying in the last three months. That’s a positive. On the other hand, we think the revenue and earnings trends are much more meaningful measures of the business. Dive deeper into the earnings by checking this interactive graph of Macau Legend Development’s earnings, revenue and cash flow.
What about the Total Shareholder Return (TSR)?
Investors should note that there’s a difference between Macau Legend Development’s total shareholder return (TSR) and its share price change, which we’ve covered above. The TSR attempts to capture the value of dividends (as if they were reinvested) and any discounted capital raisings offered to shareholders. We note that Macau Legend Development’s TSR, at -79% is higher than its share price rise of -80%. When you consider it hasn’t been paying a dividend, this data suggests shareholders may have had the opportunity to acquire attractively priced shares in a discounted capital raising.
A Different Perspective
It’s nice to see that Macau Legend Development shareholders have received a total shareholder return of 13% over the last year. Notably the five-year annualised TSR loss of 27% per year compares very unfavourably with the recent share price performance. We generally put more weight on the long term performance over the short term, but the recent improvement could hint at a (positive) inflection point within the business. It is all well and good that insiders have been buying shares, but we suggest you check here to see what price insiders were buying at.