Statistically speaking, long term investing is a profitable endeavour. But no-one is immune from buying too high. To wit, the Wynn Macau, Limited (HKG:1128) share price managed to fall 67% over five long years. That's an unpleasant experience for long term holders. Even worse, it's down 10% in about a month, which isn't fun at all. However, we note the price may have been impacted by the broader market, which is down 4.6% in the same time period.

With the stock having lost 6.6% in the past week, it's worth taking a look at business performance and seeing if there's any red flags.

In his essay The Superinvestors of Graham-and-Doddsville Warren Buffett described how share prices do not always rationally reflect the value of a business. One way to examine how market sentiment has changed over time is to look at the interaction between a company's share price and its earnings per share (EPS).

Wynn Macau became profitable within the last five years. Most would consider that to be a good thing, so it's counter-intuitive to see the share price declining. Other metrics might give us a better handle on how its value is changing over time.

It could be that the revenue decline of 14% per year is viewed as evidence that Wynn Macau is shrinking. This has probably encouraged some shareholders to sell down the stock.

The graphic below depicts how earnings and revenue have changed over time (unveil the exact values by clicking on the image).

Wynn Macau is a well known stock, with plenty of analyst coverage, suggesting some visibility into future growth. So we recommend checking out this free report showing consensus forecasts

A Different Perspective

Investors in Wynn Macau had a tough year, with a total loss of 4.2% (including dividends), against a market gain of about 17%. Even the share prices of good stocks drop sometimes, but we want to see improvements in the fundamental metrics of a business, before getting too interested. However, the loss over the last year isn't as bad as the 11% 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. 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. For example, we've discovered 2 warning signs for Wynn Macau that you should be aware of before investing here.

If you like to buy stocks alongside management, then you might just love this free list of companies. (Hint: many of them are unnoticed AND have attractive valuation).

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