Grupo Empresas Navieras (SNSE:NAVIERA) Has Compensated Shareholders With A Respectable 68% Return On Their Investment

Generally speaking the aim of active stock picking is to find companies that provide returns that are superior to the market average. And in our experience, buying the right stocks can give your wealth a significant boost. To wit, the Grupo Empresas Navieras share price has climbed 30% in five years, easily topping the market decline of 6.2% (ignoring dividends). However, more recent returns haven't been as impressive as that, with the stock returning just 3.4% in the last year , including dividends .

See our latest analysis for Grupo Empresas Navieras

With just US$610,612,000 worth of revenue in twelve months, we don't think the market considers Grupo Empresas Navieras to have proven its business plan. So it seems that the investors focused more on what could be, than paying attention to the current revenues (or lack thereof). Investors will be hoping that Grupo Empresas Navieras can make progress and gain better traction for the business, before it runs low on cash.

Companies that lack both meaningful revenue and profits are usually considered high risk. There is usually a significant chance that they will need more money for business development, putting them at the mercy of capital markets to raise equity. So the share price itself impacts the value of the shares (as it determines the cost of capital). While some companies like this go on to deliver on their plan, making good money for shareholders, many end in painful losses and eventual de-listing.

Grupo Empresas Navieras had liabilities exceeding cash by US$672m when it last reported in September 2020, according to our data. That makes it extremely high risk, in our view. So the fact that the stock is up 140% per year, over 5 years shows that high risks can lead to high rewards, sometimes. It's clear more than a few people believe in the potential. You can click on the image below to see (in greater detail) how Grupo Empresas Navieras' cash levels have changed over time.

It can be extremely risky to invest in a company that doesn't even have revenue. There's no way to know its value easily. However you can take a look at whether insiders have been buying up shares. If they are buying a significant amount of shares, that's certainly a good thing. Luckily we are in a position to provide you with this free chart of insider buying (and selling).

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. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. As it happens, Grupo Empresas Navieras' TSR for the last 5 years was 68%, which exceeds the share price return mentioned earlier. And there's no prize for guessing that the dividend payments largely explain the divergence!

A Different Perspective

We're pleased to report that Grupo Empresas Navieras shareholders have received a total shareholder return of 3.4% over one year. Of course, that includes the dividend. However, that falls short of the 11% TSR per annum it has made for shareholders, each year, over five years. The pessimistic view would be that be that the stock has its best days behind it, but on the other hand the price might simply be moderating while the business itself continues to execute. 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 2 warning signs for Grupo Empresas Navieras (1 makes us a bit uncomfortable!) that you should be aware of before investing here.

Of course Grupo Empresas Navieras may not be the best stock to buy. So you may wish to see this free collection of growth stocks.

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