919) Shareholders Got Unlucky And Saw 84% Of Their Cash Evaporate

Modern Beauty Salon Holdings Limited (HKG:919) shareholders should be happy to see the share price up 28% in the last month. But that doesn’t change the fact that the returns over the last half decade have been stomach churning. Like a ship taking on water, the share price has sunk 84% in that time. While the recent increase might be a green shoot, we’re certainly hesitant to rejoice. The million dollar question is whether the company can justify a long term recovery.

We really hope anyone holding through that price crash has a diversified portfolio. Even when you lose money, you don’t have to lose the lesson.

Check out our latest analysis for Modern Beauty Salon Holdings

To paraphrase Benjamin Graham: Over the short term the market is a voting machine, but over the long term it’s a weighing machine. By comparing earnings per share (EPS) and share price changes over time, we can get a feel for how investor attitudes to a company have morphed over time.

Modern Beauty Salon Holdings became profitable within the last five years. 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.

It could be that the revenue decline of 10% per year is viewed as evidence that Modern Beauty Salon Holdings is shrinking. That could explain the weak share price.

The company’s revenue and earnings (over time) are depicted in the image below (click to see the exact numbers).

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You can see how its balance sheet has strengthened (or weakened) over time in this free interactive graphic.

What about the Total Shareholder Return (TSR)?

We’d be remiss not to mention the difference between Modern Beauty Salon Holdings’s total shareholder return (TSR) and its share price return. The TSR attempts to capture the value of dividends (as if they were reinvested) as well as any spin-offs or discounted capital raisings offered to shareholders. Modern Beauty Salon Holdings’s TSR of was a loss of 82% for the 5 years. That wasn’t as bad as its share price return, because it has paid dividends.

A Different Perspective

We regret to report that Modern Beauty Salon Holdings shareholders are down 25% for the year. Unfortunately, that’s worse than the broader market decline of 6.9%. 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. However, the loss over the last year isn’t as bad as the 29% per annum loss investors have suffered over the last half decade. We’d need to see some sustained improvements in the key metrics before we could muster much enthusiasm. It’s always interesting to track share price performance over the longer term. But to understand Modern Beauty Salon Holdings better, we need to consider many other factors. To that end, you should learn about the 4 warning signs we’ve spotted with Modern Beauty Salon Holdings (including 1 which is is concerning) .

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.

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