Stock Analysis

ALBA (FRA:ABA) Has Compensated Shareholders With A Respectable 73% Return On Their Investment

DB:ABA
Source: Shutterstock

When we invest, we're generally looking for stocks that outperform the market average. Buying under-rated businesses is one path to excess returns. For example, long term ALBA SE (FRA:ABA) shareholders have enjoyed a 34% share price rise over the last half decade, well in excess of the market return of around 21% (not including dividends). On the other hand, the more recent gains haven't been so impressive, with shareholders gaining just 24% , including dividends .

Check out our latest analysis for ALBA

Given that ALBA 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 ALBA saw its revenue shrink by 33% per year. Even though revenue hasn't increased, the stock actually gained 6%, per year, during the same period. To us that suggests that there probably isn't a lot of correlation between the past revenue performance and the share price, but a closer look at analyst forecasts and the bottom line may well explain a lot.

The image below shows how earnings and revenue have tracked over time (if you click on the image you can see greater detail).

earnings-and-revenue-growth
DB:ABA Earnings and Revenue Growth January 18th 2021

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 ALBA the TSR over the last 5 years was 73%, which is better than the share price return mentioned above. This is largely a result of its dividend payments!

A Different Perspective

It's nice to see that ALBA shareholders have received a total shareholder return of 24% over the last year. And that does include the dividend. Since the one-year TSR is better than the five-year TSR (the latter coming in at 12% per year), it would seem that the stock's performance has improved in recent times. In the best case scenario, this may hint at some real business momentum, implying that now could be a great time to delve deeper. 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 1 warning sign for ALBA that you should be aware of before investing here.

Of course ALBA 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 DE exchanges.

When trading ALBA or any other investment, use the platform considered by many to be the Professional's Gateway to the Worlds Market, Interactive Brokers. You get the lowest-cost* trading on stocks, options, futures, forex, bonds and funds worldwide from a single integrated account. Promoted


Valuation is complex, but we're helping make it simple.

Find out whether ALBA is potentially over or undervalued by checking out our comprehensive analysis, which includes fair value estimates, risks and warnings, dividends, insider transactions and financial health.

View the Free Analysis

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.
*Interactive Brokers Rated Lowest Cost Broker by StockBrokers.com Annual Online Review 2020


Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.