Long term investing is the way to go, but that doesn't mean you should hold every stock forever. We really hate to see fellow investors lose their hard-earned money. Anyone who held Melco Resorts & Entertainment Limited (NASDAQ:MLCO) for five years would be nursing their metaphorical wounds since the share price dropped 74% in that time. And it's not just long term holders hurting, because the stock is down 52% in the last year. More recently, the share price has dropped a further 22% in a month.

After losing 4.5% this past week, it's worth investigating the company's fundamentals to see what we can infer from past performance.

Because Melco Resorts & Entertainment made a loss in the last twelve months, we think the market is probably more focussed on revenue and revenue growth, at least for now. Generally speaking, companies without profits are expected to grow revenue every year, and at a good clip. Some companies are willing to postpone profitability to grow revenue faster, but in that case one would hope for good top-line growth to make up for the lack of earnings.

Over half a decade Melco Resorts & Entertainment reduced its trailing twelve month revenue by 18% for each year. That's definitely a weaker result than most pre-profit companies report. So it's not that strange that the share price dropped 12% per year in that period. This kind of price performance makes us very wary, especially when combined with falling revenue. Ironically, that behavior could create an opportunity for the contrarian investor - but only if there are good reasons to predict a brighter future.

You can see below how earnings and revenue have changed over time (discover the exact values by clicking on the image).

Melco Resorts & Entertainment is a well known stock, with plenty of analyst coverage, suggesting some visibility into future growth. Given we have quite a good number of analyst forecasts, it might be well worth checking out this free chart depicting consensus estimates.

A Different Perspective

While the broader market gained around 21% in the last year, Melco Resorts & Entertainment shareholders lost 52%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. Unfortunately, last year's performance may indicate unresolved challenges, given that it was worse than the annualised loss of 12% over the last half decade. Generally speaking long term share price weakness can be a bad sign, though contrarian investors might want to research the stock in hope of a turnaround. While it is well worth considering the different impacts that market conditions can have on the share price, there are other factors that are even more important. Case in point: We've spotted 2 warning signs for Melco Resorts & Entertainment you should be aware of, and 1 of them can't be ignored.

For those who like to find winning investments this free list of undervalued companies with recent insider purchasing, could be just the ticket.

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

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com