It is a pleasure to report that the Duro Felguera, S.A. (BME:MDF) is up 53% in the last quarter. But that doesn't change the fact that the returns over the last half decade have been stomach churning. In fact, the share price has tumbled down a mountain to land 99% lower after that period. So we don't gain too much confidence from the recent recovery. The real question is whether the business can leave its past behind and improve itself over the years ahead.
We really hope anyone holding through that price crash has a diversified portfolio. Even when you lose money, you don't have to lose the lesson.
Given that Duro Felguera 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. When a company doesn't make profits, we'd generally expect to see good revenue growth. Some companies are willing to postpone profitability to grow revenue faster, but in that case one does expect good top-line growth.
In the last five years Duro Felguera saw its revenue shrink by 20% per year. That's definitely a weaker result than most pre-profit companies report. So it's not altogether surprising to see the share price down 15% per year in the same time period. We don't think this is a particularly promising picture. Of course, the poor performance could mean the market has been too severe selling down. That can happen.
You can see below how earnings and revenue have changed over time (discover the exact values by clicking on the image).
You can see how its balance sheet has strengthened (or weakened) over time in this free interactive graphic.
What about the Total Shareholder Return (TSR)?
We'd be remiss not to mention the difference between Duro Felguera's total shareholder return (TSR) and its 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. Duro Felguera's TSR of was a loss of 90% for the 5 years. That wasn't as bad as its share price return, because it has paid dividends.
A Different Perspective
We're pleased to report that Duro Felguera shareholders have received a total shareholder return of 78% over one year. That certainly beats the loss of about 14% per year over the last half decade. The long term loss makes us cautious, but the short term TSR gain certainly hints at a brighter future. It's always interesting to track share price performance over the longer term. But to understand Duro Felguera better, we need to consider many other factors. For instance, we've identified 2 warning signs for Duro Felguera that you should be aware of.
But note: Duro Felguera 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 ES exchanges.
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