These days it's easy to simply buy an index fund, and your returns should (roughly) match the market. But you can do a lot better than that by buying good quality businesses for attractive prices. For example, the MedAdvisor Limited (ASX:MDR) share price is 41% higher than it was five years ago, which is more than the market average. In comparison, the share price is down 35% in a year.
Check out our latest analysis for MedAdvisor
MedAdvisor isn't currently profitable, so most analysts would look to revenue growth to get an idea of how fast the underlying business is growing. 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.
For the last half decade, MedAdvisor can boast revenue growth at a rate of 36% per year. That's well above most pre-profit companies. While the compound gain of 7% per year is good, it's not unreasonable given the strong revenue growth. If the strong revenue growth continues, we'd expect the share price to follow, in time. Of course, you'll have to research the business more fully to figure out if this is an attractive opportunity.
The company's revenue and earnings (over time) are depicted in the image below (click to see the exact numbers).
Balance sheet strength is crucial. It might be well worthwhile taking a look at our free report on how its financial position has changed over time.
What about the Total Shareholder Return (TSR)?
We've already covered MedAdvisor'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. MedAdvisor hasn't been paying dividends, but its TSR of 43% exceeds its share price return of 41%, implying it has either spun-off a business, or raised capital at a discount; thereby providing additional value to shareholders.
A Different Perspective
MedAdvisor shareholders are down 35% for the year, but the market itself is up 4.0%. 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 7% per year over half a decade. If the fundamental data continues to indicate long term sustainable growth, the current sell-off could be an opportunity worth considering. 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. Even so, be aware that MedAdvisor is showing 2 warning signs in our investment analysis , and 1 of those is concerning...
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 AU exchanges.
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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. 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.
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About ASX:MDR
MedAdvisor
Provides pharmacy-driven patient engagement solutions in Australia, New Zealand, the United States, and the United Kingdom.
Undervalued with reasonable growth potential.
