If you love investing in stocks you're bound to buy some losers. But the last three years have been particularly tough on longer term Firstwave Cloud Technology Limited (ASX:FCT) shareholders. Unfortunately, they have held through a 63% decline in the share price in that time. Shareholders have had an even rougher run lately, with the share price down 36% in the last 90 days.
Firstwave Cloud Technology 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.
Over three years, Firstwave Cloud Technology grew revenue at 2.9% per year. Given it's losing money in pursuit of growth, we are not really impressed with that. This uninspiring revenue growth has no doubt helped send the share price lower; it dropped 18% during the period. When a stock falls hard like this, some investors like to add the company to a watchlist (in case the business recovers, longer term). After all, growing a business isn't easy, and the process will not always be smooth.
You can see how earnings and revenue have changed over time in the image below (click on the chart to see the exact values).
You can see how its balance sheet has strengthened (or weakened) over time in this free interactive graphic.
What about the Total Shareholder Return (TSR)?
Investors should note that there's a difference between Firstwave Cloud Technology's total shareholder return (TSR) and its share price change, which we've covered above. 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 Firstwave Cloud Technology's TSR, at -58% is higher than its share price return of -63%. 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
While the market return was 40% in the last year, Firstwave Cloud Technology returned 37% to shareholders. Given the three-year TSR of 16% per year, shareholders probably aren't too concerned by the recent gain! The optimist would say that this might be the dawn of a brighter future. 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. For instance, we've identified 5 warning signs for Firstwave Cloud Technology (3 are concerning) that you should be aware of.
Of course, you might find a fantastic investment by looking elsewhere. So take a peek at this free list of companies we expect will 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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