Stock Analysis

Did You Participate In Any Of Cargojet's (TSE:CJT) Incredible 722% Return?

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TSX:CJT
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For many, the main point of investing in the stock market is to achieve spectacular returns. And highest quality companies can see their share prices grow by huge amounts. Don't believe it? Then look at the Cargojet Inc. (TSE:CJT) share price. It's 668% higher than it was five years ago. And this is just one example of the epic gains achieved by some long term investors. On top of that, the share price is up 16% in about a quarter. This could be related to the recent financial results, released recently - you can catch up on the most recent data by reading our company report.

It really delights us to see such great share price performance for investors.

View our latest analysis for Cargojet

Given that Cargojet 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. 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.

In the last 5 years Cargojet saw its revenue grow at 15% per year. That's a fairly respectable growth rate. However, the share price gain of 50% during the period is considerably stronger. It might not be cheap but a (long-term) growth stock like this is usually well worth taking a closer look at.

You can see below how earnings and revenue have changed over time (discover the exact values by clicking on the image).

earnings-and-revenue-growth
TSX:CJT Earnings and Revenue Growth November 23rd 2020

Cargojet is a well known stock, with plenty of analyst coverage, suggesting some visibility into future growth. Given we have quite a good number of analyst forecasts, it might be well worth checking out this free chart depicting consensus estimates.

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 incorporates the value of any spin-offs or discounted capital raisings, along with any dividends, based on the assumption that the dividends are reinvested. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. We note that for Cargojet the TSR over the last 5 years was 722%, which is better than the share price return mentioned above. This is largely a result of its dividend payments!

A Different Perspective

It's good to see that Cargojet has rewarded shareholders with a total shareholder return of 108% in the last twelve months. That's including the dividend. That's better than the annualised return of 52% over half a decade, implying that the company is doing better recently. Someone with an optimistic perspective could view the recent improvement in TSR as indicating that the business itself is getting better with time. 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. Consider for instance, the ever-present spectre of investment risk. We've identified 2 warning signs with Cargojet (at least 1 which is a bit concerning) , and understanding them should be part of your investment process.

But note: Cargojet may not be the best stock to buy. So take a peek at this free list of interesting companies with past earnings growth (and further growth forecast).

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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