If You Had Bought SECOS Group (ASX:SES) Stock Three Years Ago, You Could Pocket A 100% Gain Today

By buying an index fund, investors can approximate the average market return. But if you pick the right individual stocks, you could make more than that. Just take a look at SECOS Group Limited (ASX:SES), which is up 100%, over three years, soundly beating the market return of 9.0% (not including dividends).

See our latest analysis for SECOS Group

SECOS Group 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. Some companies are willing to postpone profitability to grow revenue faster, but in that case one does expect good top-line growth.

In the last 3 years SECOS Group saw its revenue shrink by 3.8% per year. Despite the lack of revenue growth, the stock has returned 26%, compound, over three years. Unless the company is going to make profits soon, we would be pretty cautious about it.

The image below shows how earnings and revenue have tracked over time (if you click on the image you can see greater detail).

Take a more thorough look at SECOS Group's financial health with this free report on its balance sheet.

What about the Total Shareholder Return (TSR)?

Investors should note that there's a difference between SECOS Group's total shareholder return (TSR) and its share price change, which we've covered above. The TSR attempts to capture the value of dividends (as if they were reinvested) as well as any spin-offs or discounted capital raisings offered to shareholders. SECOS Group hasn't been paying dividends, but its TSR of 104% exceeds its share price return of 100%, implying it has either spun-off a business, or raised capital at a discount; thereby providing additional value to shareholders.

A Different Perspective

It's nice to see that SECOS Group shareholders have received a total shareholder return of 89% over the last year. Since the one-year TSR is better than the five-year TSR (the latter coming in at 9% per year), it would seem that the stock's performance has improved in recent times. Given the share price momentum remains strong, it might be worth taking a closer look at the stock, lest you miss an opportunity. It's always interesting to track share price performance over the longer term. But to understand SECOS Group better, we need to consider many other factors. Consider for instance, the ever-present spectre of investment risk. We've identified 2 warning signs with SECOS Group , and understanding them should be part of your investment process.

We will like SECOS Group better if we see some big insider buys. While we wait, check out this free list of growing companies with considerable, recent, insider buying.

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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