Hornby PLC (LON:HRN) shareholders have seen the share price descend 12% over the month. But that doesn't change the fact that the returns over the last three years have been very strong. Indeed, the share price is up a very strong 104% in that time. After a run like that some may not be surprised to see prices moderate. If the business can perform well for years to come, then the recent drop could be an opportunity.
Because Hornby made a loss in the last twelve months, we think the market is probably more focussed on revenue and revenue growth, at least for now. Generally speaking, companies without profits are expected to grow revenue every year, and at a good clip. Some companies are willing to postpone profitability to grow revenue faster, but in that case one does expect good top-line growth.
Over the last three years Hornby has grown its revenue at 1.9% annually. Considering the company is losing money, we think that rate of revenue growth is uninspiring. In contrast, the stock has popped 27% per year in that time - an impressive result. We'd need to take a closer look at the revenue and profit trends to see whether the improvements might justify that sort of increase. It seems likely that the market is pretty optimistic about Hornby, given it is losing money.
The image below shows how earnings and revenue have tracked over time (if you click on the image you can see greater detail).
We like that insiders have been buying shares in the last twelve months. Even so, future earnings will be far more important to whether current shareholders make money. It might be well worthwhile taking a look at our free report on Hornby's earnings, revenue and cash flow.
A Different Perspective
It's nice to see that Hornby shareholders have received a total shareholder return of 50% over the last year. That certainly beats the loss of about 6% per year over the last half decade. We generally put more weight on the long term performance over the short term, but the recent improvement could hint at a (positive) inflection point within the business. It's always interesting to track share price performance over the longer term. But to understand Hornby better, we need to consider many other factors. Take risks, for example - Hornby has 2 warning signs we think you should be aware of.
Hornby is not the only stock insiders are buying. So take a peek at this free list of growing companies with insider buying.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on GB exchanges.
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Hornby PLC, through its subsidiaries, engages in the design, development, sourcing, and distribution of hobby and interactive products in the United Kingdom, the United State, Spain, Italy, and rest of Europe.
Adequate balance sheet and slightly overvalued.