Should Tempo Australia Be Disappointed With Their 44% Profit?

Tempo Australia Limited (ASX:TPP) shareholders might be concerned after seeing the share price drop 23% in the last month. Looking further back, the stock has generated good profits over five years. After all, the share price is up a market-beating 44% in that time.

View our latest analysis for Tempo Australia

Given that Tempo Australia didn’t make a profit in the last twelve months, we’ll focus on revenue growth to form a quick view of its business development. When a company doesn’t make profits, we’d generally expect to see good revenue growth. That’s because fast revenue growth can be easily extrapolated to forecast profits, often of considerable size.

In the last 5 years Tempo Australia saw its revenue grow at 8.2% per year. That’s a fairly respectable growth rate. While the share price has beat the market, compounding at 7.5% yearly, over five years, there’s certainly some potential that the market hasn’t fully considered the growth track record. The key question is whether revenue growth will slow down, and if so, how quickly. There’s no doubt that it can be difficult to value pre-profit companies.

The graphic below shows how revenue and earnings have changed as management guided the business forward. If you want to see cashflow, you can click on the chart.

ASX:TPP Income Statement, March 5th 2019
ASX:TPP Income Statement, March 5th 2019

We like that insiders have been buying shares in the last twelve months. Having said that, most people consider earnings and revenue growth trends to be a more meaningful guide to the business. This free report showing analyst forecasts should help you form a view on Tempo Australia

A Different Perspective

While the broader market gained around 9.8% in the last year, Tempo Australia shareholders lost 43%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. On the bright side, long term shareholders have made money, with a gain of 7.5% 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. Investors who like to make money usually check up on insider purchases, such as the price paid, and total amount bought. You can find out about the insider purchases of Tempo Australia by clicking this link.

There are plenty of other companies that have insiders buying up shares. You probably do not want to miss this free list of growing companies that insiders are buying.

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

We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned. Thank you for reading.