Shareholders have faith in loss-making Metalfrio Solutions (BVMF:FRIO3) as stock climbs 11% in past week, taking five-year gain to 147%

By
Simply Wall St
Published
August 17, 2021
BOVESPA:FRIO3
Source: Shutterstock

It hasn't been the best quarter for Metalfrio Solutions S.A. (BVMF:FRIO3) shareholders, since the share price has fallen 14% in that time. On the bright side the share price is up over the last half decade. In that time, it is up 53%, which isn't bad, but is below the market return of 123%. While the long term returns are impressive, we do have some sympathy for those who bought more recently, given the 26% drop, in the last year.

Since the stock has added R$28m to its market cap in the past week alone, let's see if underlying performance has been driving long-term returns.

Check out our latest analysis for Metalfrio Solutions

Given that Metalfrio Solutions 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. Generally speaking, companies without profits are expected to grow revenue every year, and at a good clip. 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.

In the last 5 years Metalfrio Solutions saw its revenue grow at 12% per year. That's a fairly respectable growth rate. While the share price has gained 9% per year for five years, that's hardly amazing considering the market also rose. You could even argue that the share price was over optimistic, previously.

The company's revenue and earnings (over time) are depicted in the image below (click to see the exact numbers).

earnings-and-revenue-growth
BOVESPA:FRIO3 Earnings and Revenue Growth August 17th 2021

If you are thinking of buying or selling Metalfrio Solutions stock, you should check out this FREE detailed report on its balance sheet.

What about the Total Shareholder Return (TSR)?

We've already covered Metalfrio Solutions' 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. Metalfrio Solutions' TSR of 147% for the 5 years exceeded its share price return, because it has paid dividends.

A Different Perspective

Metalfrio Solutions shareholders are down 26% for the year, but the market itself is up 19%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. On the bright side, long term shareholders have made money, with a gain of 20% 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. 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 instance, we've identified 3 warning signs for Metalfrio Solutions (2 don't sit too well with us) 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 BR exchanges.

If you're looking for stocks to buy, use the lowest-cost* platform that is rated #1 Overall by Barron’s, Interactive Brokers. Trade stocks, options, futures, forex, bonds and funds on 135 markets, all from a single integrated account. Promoted


Discounted cash flow calculation for every stock

Simply Wall St does a detailed discounted cash flow calculation every 6 hours for every stock on the market, so if you want to find the intrinsic value of any company just search here. It’s FREE.

Make Confident Investment Decisions

Simply Wall St's Editorial Team provides unbiased, factual reporting on global stocks using in-depth fundamental analysis.
Find out more about our editorial guidelines and team.