Statistically speaking, long term investing is a profitable endeavour. But that doesn’t mean long term investors can avoid big losses. Zooming in on an example, the Melco Resorts & Entertainment Limited (NASDAQ:MLCO) share price dropped 55% in the last half decade. That’s not a lot of fun for true believers. The falls have accelerated recently, with the share price down 10% in the last three months. Of course, this share price action may well have been influenced by the 5.4% decline in the broader market, throughout the period.

So let’s have a look and see if the longer term performance of the company has been in line with the underlying business’ progress.

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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.

Melco Resorts & Entertainment 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.

In contrast to the share price, revenue has actually increased by 3.0% a year in the five year period. A more detailed examination of the revenue and earnings may or may not explain why the share price languishes; there could be an opportunity.

You can see how earnings and revenue have changed over time in the image below (click on the chart to see the exact values).

Melco Resorts & Entertainment is well known by investors, and plenty of clever analysts have tried to predict the future profit levels. So it makes a lot of sense to check out what analysts think Melco Resorts & Entertainment will earn in the future (free analyst consensus estimates)

Melco Resorts & Entertainment shareholders are down 20% for the year, but the market itself is up 9.5%. 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 9% over the last half decade. We realise that Baron Rothschild has said investors should “buy when there is blood on the streets”, but we caution that investors should first be sure they are buying a high quality business. 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 instance, we’ve identified 3 warning signs for Melco Resorts & Entertainment (2 make us uncomfortable) that you should be aware of.