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It's not possible to invest over long periods without making some bad investments. But really bad investments should be rare. So take a moment to sympathize with the long term shareholders of Mei Ah Entertainment Group Limited (HKG:391), who have seen the share price tank a massive 72% over a three year period. That would certainly shake our confidence in the decision to own the stock. And more recent buyers are having a tough time too, with a drop of 24% in the last year.
Check out our latest analysis for Mei Ah Entertainment Group
Because Mei Ah Entertainment Group is loss-making, we think the market is probably more focussed on revenue and revenue growth, at least for now. When a company doesn't make profits, we'd generally expect to see good revenue growth. Some companies are willing to postpone profitability to grow revenue faster, but in that case one does expect good top-line growth.
Over three years, Mei Ah Entertainment Group grew revenue at 0.2% per year. That's not a very high growth rate considering it doesn't make profits. Nonetheless, it's fair to say the rapidly declining share price (down 35%, compound, over three years) suggests the market is very disappointed with this level of growth. We generally don't try to 'catch the falling knife'. Of course, revenue growth is nice but generally speaking the lower the profits, the riskier the business - and this business isn't making steady profits.
You can see how earnings and revenue have changed over time in the image below (click on the chart to see the exact values).
We consider it positive that insiders have made significant purchases in the last year. Having said that, most people consider earnings and revenue growth trends to be a more meaningful guide to the business. It might be well worthwhile taking a look at our free report on Mei Ah Entertainment Group's earnings, revenue and cash flow.
A Different Perspective
We regret to report that Mei Ah Entertainment Group shareholders are down 24% for the year. Unfortunately, that's worse than the broader market decline of 4.1%. 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 22% per year over five years. We realise that Buffett 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 businesses. If you want to research this stock further, the data on insider buying is an obvious place to start. You can click here to see who has been buying shares - and the price they paid.