Investors Who Bought Digital Domain Holdings (HKG:547) Shares Three Years Ago Are Now Down 77%
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It's not possible to invest over long periods without making some bad investments. But really big losses can really drag down an overall portfolio. So take a moment to sympathize with the long term shareholders of Digital Domain Holdings Limited (HKG:547), who have seen the share price tank a massive 77% over a three year period. That'd be enough to cause even the strongest minds some disquiet. The more recent news is of little comfort, with the share price down 24% in a year. The falls have accelerated recently, with the share price down 22% in the last three months.
See our latest analysis for Digital Domain Holdings
Digital Domain Holdings isn't a profitable company, so it is unlikely we'll see a strong correlation between its share price and its earnings per share (EPS). Arguably revenue is our next best option. Shareholders of unprofitable companies usually expect strong revenue growth. That's because it's hard to be confident a company will be sustainable if revenue growth is negligible, and it never makes a profit.
Over three years, Digital Domain Holdings grew revenue at 2.5% 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 39%, compound, over three years) suggests the market is very disappointed with this level of growth. While we're definitely wary of the stock, after that kind of performance, it could be an over-reaction. Before considering a purchase, take a look at the losses the company is racking up.
You can see how revenue and earnings have changed over time in the image below, (click on the chart to see cashflow).
It's probably worth noting we've seen significant insider buying in the last quarter, which we consider 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 Digital Domain Holdings's earnings, revenue and cash flow.
A Different Perspective
While the broader market lost about 14% in the twelve months, Digital Domain Holdings shareholders did even worse, losing 24%. 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. On the bright side, long term shareholders have made money, with a gain of 4.6% per year over half a decade. It could be that the recent sell-off is an opportunity, so it may be worth checking the fundamental data for signs of a long term growth trend. 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.
If you like to buy stocks alongside management, then you might just love this free list of companies. (Hint: insiders have been buying them).
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.
