Skygate Solutions Berhad (KLSE:EWEIN) shareholders have earned a 52% CAGR over the last three years

It might seem bad, but the worst that can happen when you buy a stock (without leverage) is that its share price goes to zero. But in contrast you can make much more than 100% if the company does well. For instance the Skygate Solutions Berhad (KLSE:EWEIN) share price is 213% higher than it was three years ago. How nice for those who held the stock! Also pleasing for shareholders was the 34% gain in the last three months.

So let's investigate and see if the longer term performance of the company has been in line with the underlying business' progress.

Check out our latest analysis for Skygate Solutions Berhad

We don't think that Skygate Solutions Berhad's modest trailing twelve month profit has the market's full attention at the moment. We think revenue is probably a better guide. Generally speaking, we'd consider a stock like this alongside loss-making companies, simply because the quantum of the profit is so low. It would be hard to believe in a more profitable future without growing revenues.

In the last 3 years Skygate Solutions Berhad saw its revenue shrink by 54% per year. So we wouldn't have expected the share price to gain 46% per year, but it has. It's a good reminder that expectations about the future, not the past history, always impact share prices.

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

earnings-and-revenue-growth

It's probably worth noting that the CEO is paid less than the median at similar sized companies. It's always worth keeping an eye on CEO pay, but a more important question is whether the company will grow earnings throughout the years. It might be well worthwhile taking a look at our free report on Skygate Solutions Berhad's earnings, revenue and cash flow.

What About The Total Shareholder Return (TSR)?

We've already covered Skygate Solutions Berhad's share price action, but we should also mention its 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. Dividends have been really beneficial for Skygate Solutions Berhad shareholders, and that cash payout contributed to why its TSR of 248%, over the last 3 years, is better than the share price return.

A Different Perspective

Investors in Skygate Solutions Berhad had a tough year, with a total loss of 7.0%, against a market gain of about 24%. 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. On the bright side, long term shareholders have made money, with a gain of 16% 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. I find it very interesting to look at share price over the long term as a proxy for business performance. But to truly gain insight, we need to consider other information, too. Take risks, for example - Skygate Solutions Berhad has 2 warning signs (and 1 which is a bit concerning) we think you should know about.

But note: Skygate Solutions Berhad may not be the best stock to buy. So take a peek at this free list of interesting companies with past earnings growth (and further growth forecast).

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