Should Alcor MicroCorp (GTSM:8054) Be Disappointed With Their 51% Profit?

Passive investing in index funds can generate returns that roughly match the overall market. But you can significantly boost your returns by picking above-average stocks. For example, the Alcor Micro,Corp. (GTSM:8054) share price is up 51% in the last year, clearly besting the market return of around 19% (not including dividends). So that should have shareholders smiling. However, the stock hasn't done so well in the longer term, with the stock only up 4.5% in three years.

See our latest analysis for Alcor MicroCorp

Alcor MicroCorp wasn't profitable in the last twelve months, it is unlikely we'll see a strong correlation between its share price and its earnings per share (EPS). Arguably revenue is our next best option. 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.

Alcor MicroCorp actually shrunk its revenue over the last year, with a reduction of 17%. The stock is up 51% in that time, a fine performance given the revenue drop. We can correlate the share price rise with revenue or profit growth, but it seems the market had previously expected weaker results, and sentiment around the stock is improving.

The company's revenue and earnings (over time) are depicted in the image below (click to see the exact numbers).

This free interactive report on Alcor MicroCorp's balance sheet strength is a great place to start, if you want to investigate the stock further.

What About Dividends?

As well as measuring the share price return, investors should also consider the total shareholder return (TSR). The TSR incorporates the value of any spin-offs or discounted capital raisings, along with any dividends, based on the assumption that the dividends are reinvested. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. We note that for Alcor MicroCorp the TSR over the last year was 55%, which is better than the share price return mentioned above. The dividends paid by the company have thusly boosted the total shareholder return.

A Different Perspective

It's nice to see that Alcor MicroCorp shareholders have received a total shareholder return of 55% over the last year. That's including the dividend. That's better than the annualised return of 5% over half a decade, implying that the company is doing better recently. Someone with an optimistic perspective could view the recent improvement in TSR as indicating that the business itself is getting better with time. It's always interesting to track share price performance over the longer term. But to understand Alcor MicroCorp better, we need to consider many other factors. Consider for instance, the ever-present spectre of investment risk. We've identified 3 warning signs with Alcor MicroCorp (at least 1 which is a bit unpleasant) , and understanding them should be part of your investment process.

But note: Alcor MicroCorp 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 TW 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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