Further weakness as Castellum (STO:CAST) drops 4.0% this week, taking three-year losses to 18%

As an investor its worth striving to ensure your overall portfolio beats the market average. But if you try your hand at stock picking, you risk returning less than the market. Unfortunately, that's been the case for longer term Castellum AB (publ) (STO:CAST) shareholders, since the share price is down 35% in the last three years, falling well short of the market decline of around 6.6%.

With the stock having lost 4.0% in the past week, it's worth taking a look at business performance and seeing if there's any red flags.

See our latest analysis for Castellum

To paraphrase Benjamin Graham: Over the short term the market is a voting machine, but over the long term it's a weighing machine. One imperfect but simple way to consider how the market perception of a company has shifted is to compare the change in the earnings per share (EPS) with the share price movement.

We know that Castellum has been profitable in the past. On the other hand, it reported a trailing twelve months loss, suggesting it isn't reliably profitable. Other metrics might give us a better handle on how its value is changing over time.

We note that, in three years, revenue has actually grown at a 18% annual rate, so that doesn't seem to be a reason to sell shares. It's probably worth investigating Castellum further; while we may be missing something on this analysis, there might also be an opportunity.

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

We consider it positive that insiders have made significant purchases in the last year. Having said that, most people consider earnings and revenue growth trends to be a more meaningful guide to the business. You can see what analysts are predicting for Castellum in this interactive graph of future profit estimates.

What About The Total Shareholder Return (TSR)?

We've already covered Castellum's share price action, but we should also mention its total shareholder return (TSR). The TSR attempts to capture the value of dividends (as if they were reinvested) as well as any spin-offs or discounted capital raisings offered to shareholders. Castellum's TSR of was a loss of 18% for the 3 years. That wasn't as bad as its share price return, because it has paid dividends.

A Different Perspective

Castellum shareholders have received returns of 27% over twelve months, which isn't far from the general market return. The silver lining is that the share price is up in the short term, which flies in the face of the annualised loss of 1.5% over the last five years. We're pretty skeptical of turnaround stories, but it's good to see the recent share price recovery. It's always interesting to track share price performance over the longer term. But to understand Castellum better, we need to consider many other factors. For instance, we've identified 1 warning sign for Castellum that you should be aware of.

There are plenty of other companies that have insiders buying up shares. You probably do not want to miss this free list of undervalued small cap companies that insiders are buying.

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

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. 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.