Hövding Sverige AB (publ) (STO:HOVD) shareholders might be concerned after seeing the share price drop 20% in the last month. But that doesn’t change the reality that over twelve months the stock has done really well. In that time we’ve seen the stock easily surpass the market return, with a gain of 14%.
Hövding Sverige wasn’t profitable in the last twelve months, 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 the last twelve months, Hövding Sverige’s revenue grew by 22%. That’s a fairly respectable growth rate. While the share price performed well, gaining 14% over twelve months, you could argue the revenue growth warranted it. If revenue stays on trend, there may be plenty more share price gains to come. But it’s crucial to check profitability and cash flow before forming a view on the future.
The graphic below depicts how earnings and revenue have changed over time (unveil the exact values by clicking on the image).
You can see how its balance sheet has strengthened (or weakened) over time in this free interactive graphic.
What about the Total Shareholder Return (TSR)?
We’ve already covered Hövding Sverige’s share price action, but we should also mention its total shareholder return (TSR). Arguably the TSR is a more complete return calculation because it accounts for the value of dividends (as if they were reinvested), along with the hypothetical value of any discounted capital that have been offered to shareholders. Hövding Sverige hasn’t been paying dividends, but its TSR of 16% exceeds its share price return of 14%, implying it has either spun-off a business, or raised capital at a discount; thereby providing additional value to shareholders.
A Different Perspective
We’re pleased to report that Hövding Sverige rewarded shareholders with a total shareholder return of 16% over the last year. That gain actually surpasses the 13% TSR it generated (per year) over three years. These improved returns may hint at some real business momentum, implying that now could be a great time to delve deeper. 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. To that end, you should learn about the 6 warning signs we’ve spotted with Hövding Sverige (including 2 which is make us uncomfortable) .
If you would prefer to check out another company — one with potentially superior financials — then do not miss this free list of companies that have proven they can grow earnings.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on SE exchanges.
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