This week we saw the DXN Limited (ASX:DXN) share price climb by 14%. But in truth the last year hasn't been good for the share price. The cold reality is that the stock has dropped 11% in one year, under-performing the market.
See our latest analysis for DXN
Given that DXN 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. 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 twelve months, DXN increased its revenue by 163%. That's well above most other pre-profit companies. Given the revenue growth, the share price drop of 11% seems quite harsh. Our sympathies to shareholders who are now underwater. Prima facie, revenue growth like that should be a good thing, so it's worth checking whether losses have stabilized. Our monkey brains haven't evolved to think exponentially, so humans do tend to underestimate companies that have exponential growth.
You can see how earnings and revenue have changed over time in the image below (click on the chart to see the exact values).
We like that insiders have been buying shares in the last twelve months. Even so, future earnings will be far more important to whether current shareholders make money. It might be well worthwhile taking a look at our free report on DXN's earnings, revenue and cash flow.
What about the Total Shareholder Return (TSR)?
We've already covered DXN'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. We note that DXN's TSR, at 2.2% is higher than its share price return of -11%. When you consider it hasn't been paying a dividend, this data suggests shareholders have benefitted from a spin-off, or had the opportunity to acquire attractively priced shares in a discounted capital raising.
A Different Perspective
DXN shareholders have gained 2.2% for the year. The bad news is that's no better than the average market return, which was roughly 55%. The stock trailed the market by 7.8% in that time, testament to the power of passive investing. It might be that investors are more concerned about the business lately due to some fundamental change (or else the share price simply got ahead of itself, previously). While it is well worth considering the different impacts that market conditions can have on the share price, there are other factors that are even more important. For example, we've discovered 4 warning signs for DXN (3 don't sit too well with us!) that you should be aware of before investing here.
If you like to buy stocks alongside management, then you might just love this free list of companies. (Hint: insiders have been buying them).
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:DXN
DXN
Engages in the design, manufacture, and operation of data centers in Australia.
Good value low.
