Investors ignore increasing losses at Bowen Coking Coal (ASX:BCB) as stock jumps 13% this past week

The last three months have been tough on Bowen Coking Coal Limited (ASX:BCB) shareholders, who have seen the share price decline a rather worrying 45%. But that doesn't change the fact that the returns over the last five years have been very strong. It's fair to say most would be happy with 122% the gain in that time. Generally speaking the long term returns will give you a better idea of business quality than short periods can. Ultimately business performance will determine whether the stock price continues the positive long term trend. While the long term returns are impressive, we do have some sympathy for those who bought more recently, given the 80% drop, in the last year.

The past week has proven to be lucrative for Bowen Coking Coal investors, so let's see if fundamentals drove the company's five-year performance.

Check out our latest analysis for Bowen Coking Coal

Bowen Coking Coal isn't currently profitable, so most analysts would look to revenue growth to get an idea of how fast the underlying business is growing. When a company doesn't make profits, we'd generally hope to see good revenue growth. Some companies are willing to postpone profitability to grow revenue faster, but in that case one would hope for good top-line growth to make up for the lack of earnings.

For the last half decade, Bowen Coking Coal can boast revenue growth at a rate of 95% per year. Even measured against other revenue-focussed companies, that's a good result. Meanwhile, its share price performance certainly reflects the strong growth, given the share price grew at 17% per year, compound, during the period. This suggests the market has well and truly recognized the progress the business has made. To our minds that makes Bowen Coking Coal worth investigating - it may have its best days ahead.

You can see below how earnings and revenue have changed over time (discover the exact values by clicking on the image).

It's probably worth noting we've seen significant insider buying in the last quarter, which we consider a positive. On the other hand, we think the revenue and earnings trends are much more meaningful measures of the business. This free report showing analyst forecasts should help you form a view on Bowen Coking Coal

What About The Total Shareholder Return (TSR)?

Investors should note that there's a difference between Bowen Coking Coal's total shareholder return (TSR) and its share price change, which we've covered above. 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. Bowen Coking Coal hasn't been paying dividends, but its TSR of 133% exceeds its share price return of 122%, implying it has either spun-off a business, or raised capital at a discount; thereby providing additional value to shareholders.

A Different Perspective

Bowen Coking Coal shareholders are down 80% for the year, but the market itself is up 14%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. Longer term investors wouldn't be so upset, since they would have made 18%, each year, over five years. If the fundamental data continues to indicate long term sustainable growth, the current sell-off could be an opportunity worth considering. It's always interesting to track share price performance over the longer term. But to understand Bowen Coking Coal better, we need to consider many other factors. Like risks, for instance. Every company has them, and we've spotted 3 warning signs for Bowen Coking Coal (of which 1 can't be ignored!) you should know about.

Bowen Coking Coal is not the only stock that insiders are buying. For those who like to find winning investments this free list of growing companies with recent insider purchasing, could be just the ticket.

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

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.