Investors in Chemtrade Logistics Income Fund (TSE:CHE.UN) from five years ago are still down 32%, even after 8.3% gain this past week

By
Simply Wall St
Published
March 14, 2022
TSX:CHE.UN
Source: Shutterstock

While not a mind-blowing move, it is good to see that the Chemtrade Logistics Income Fund (TSE:CHE.UN) share price has gained 14% in the last three months. But over the last half decade, the stock has not performed well. In fact, the share price is down 58%, which falls well short of the return you could get by buying an index fund.

On a more encouraging note the company has added CA$65m to its market cap in just the last 7 days, so let's see if we can determine what's driven the five-year loss for shareholders.

View our latest analysis for Chemtrade Logistics Income Fund

Chemtrade Logistics Income Fund isn't currently profitable, so most analysts would look to revenue growth to get an idea of how fast the underlying business is growing. Shareholders of unprofitable companies usually expect strong revenue growth. That's because fast revenue growth can be easily extrapolated to forecast profits, often of considerable size.

Over five years, Chemtrade Logistics Income Fund grew its revenue at 1.5% per year. That's not a very high growth rate considering it doesn't make profits. This lacklustre growth has no doubt fueled the loss of 10% per year, in that time. We'd want to see proof that future revenue growth is likely to be significantly stronger before getting too interested in Chemtrade Logistics Income Fund. When a stock falls hard like this, some investors like to add the company to a watchlist (in case the business recovers, longer term).

The graphic below depicts how earnings and revenue have changed over time (unveil the exact values by clicking on the image).

earnings-and-revenue-growth
TSX:CHE.UN Earnings and Revenue Growth March 14th 2022

You can see how its balance sheet has strengthened (or weakened) over time in this free interactive graphic.

What About Dividends?

When looking at investment returns, it is important to consider the difference between total shareholder return (TSR) and share price return. 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. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. We note that for Chemtrade Logistics Income Fund the TSR over the last 5 years was -32%, which is better than the share price return mentioned above. The dividends paid by the company have thusly boosted the total shareholder return.

A Different Perspective

It's nice to see that Chemtrade Logistics Income Fund shareholders have received a total shareholder return of 26% over the last year. And that does include the dividend. There's no doubt those recent returns are much better than the TSR loss of 6% per year over five years. This makes us a little wary, but the business might have turned around its fortunes. It's always interesting to track share price performance over the longer term. But to understand Chemtrade Logistics Income Fund better, we need to consider many other factors. For example, we've discovered 1 warning sign for Chemtrade Logistics Income Fund that you should be aware of before investing here.

If you would prefer to check out another company -- one with potentially superior financials -- then do not miss this free list of companies that have proven they can grow earnings.

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

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