The last three years have not been profitable for investors in Mandarin Oriental International (SGX:M04).

To justify the effort of selecting individual stocks, it is worth trying to beat the returns from a market index fund. However, it is virtually certain that sometimes you will buy a stock that does not provide the average market rate of return. We regret to inform you that this is a long-term issue Mandarin Oriental International Limited (SGX:M04) had this experience – the share price fell 19% in three years, compared to a market return of around 22%.

It is worth assessing whether the company’s economic performance follows these disappointing shareholder returns, or whether there is some discrepancy between them. So let’s do the same.

View our latest analysis for Mandarin Oriental International

Mandarin Oriental International isn’t currently profitable, so most analysts will look to revenue growth to get an idea of ​​how quickly the core business is growing. Generally speaking, companies without profits are expected to grow revenues every year, and at a good rate. Some companies are willing to postpone profitability in order to grow revenues faster, but in this case you can hope for good revenue growth to compensate for the lack of profits.

Over the past three years, Mandarin Oriental International has seen total revenue growth of 27% annually. This is significantly higher than most other pre-profit companies. Even though revenues were growing, the stock price was falling at a rate of 6% per year. This seems to be an unlucky outcome for holders. It seems likely that actual growth was lower than shareholder expectations. Before considering a purchase, investors should consider how quickly expenses are growing relative to revenues.

You can see how earnings and revenue have changed over time in the image below (click on the chart to see the exact values).

Balance sheet strength is key. Maybe it’s worth taking a look at ours free a report on how its financial situation has changed over time.

What about dividends?

In addition to measuring share price return, investors should also consider total shareholder return (TSR). 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 much higher than the share price return. We note that for Mandarin Oriental International the TSR over the last 3 years was -15%, which is better than the share price return mentioned above. Thus, the dividends paid by the company increased its stock prices total shareholder return.

The story continues

Another perspective

Mandarin Oriental International delivered a TSR of 4.5% over the last twelve months. But this return is lower than the market return. On the other hand, it’s still a profit, and actually better than the average return of 3% over half a decade. This may indicate that the company is acquiring new investors while implementing its strategy. It’s always interesting to track share price performance over the long term. However, to better understand Mandarin Oriental International, we need to consider many other factors. We discovered for example 1 warning sign for Mandarin Oriental International what you should know before investing here.

If you’d rather check out another company – one with potentially better financials – don’t miss out free a list of companies that have proven that they can increase profits.

Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on Singapore exchanges.

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This article by Simply Wall St is of a general nature. We comment based on historical data and analyst forecasts, using only an unbiased methodology, and our articles are not intended to provide financial advice. It is not a recommendation to buy or sell any stock and does not take into account your objectives or financial situation. Our goal is to provide long-term, focused analysis based on fundamental data. Please note that our analysis may not reflect the latest price-sensitive company announcements or qualitative content. Simply Wall St has no position in any of the stocks mentioned.