Investors can approximate the average market return by buying an index fund. While individual stocks can be big winners, plenty more fail to generate satisfactory returns. That downside risk was realized by Tigerair Taiwan Co., Ltd. (GTSM:6757) shareholders over the last year, as the share price declined 33%. That falls noticeably short of the market return of around 39%. Tigerair Taiwan hasn't been listed for long, so although we're wary of recent listings that perform poorly, it may still prove itself with time.
Tigerair Taiwan isn't currently profitable, so most analysts would look to revenue growth to get an idea of how fast the underlying business is growing. When a company doesn't make profits, we'd generally expect to see good revenue growth. That's because fast revenue growth can be easily extrapolated to forecast profits, often of considerable size.
Tigerair Taiwan's revenue didn't grow at all in the last year. In fact, it fell 33%. That's not what investors generally want to see. The stock price has languished lately, falling 33% in a year. What would you expect when revenue is falling, and it doesn't make a profit? It's hard to escape the conclusion that buyers must envision either growth down the track, cost cutting, or both.
The company's revenue and earnings (over time) are depicted in the image below (click to see the exact numbers).
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. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. We note that for Tigerair Taiwan the TSR over the last year was -28%, 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
While Tigerair Taiwan shareholders are down 28% for the year (even including dividends), the market itself is up 39%. While the aim is to do better than that, it's worth recalling that even great long-term investments sometimes underperform for a year or more. With the stock down 7.0% over the last three months, the market doesn't seem to believe that the company has solved all its problems. Given the relatively short history of this stock, we'd remain pretty wary until we see some strong business performance. 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. To that end, you should learn about the 3 warning signs we've spotted with Tigerair Taiwan (including 1 which shouldn't be ignored) .
If you like to buy stocks alongside management, then you might just love this free list of companies. (Hint: insiders have been buying them).
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on TW exchanges.
If you’re looking to trade Tigerair Taiwan, open an account with the lowest-cost* platform trusted by professionals, Interactive Brokers. Their clients from over 200 countries and territories trade stocks, options, futures, forex, bonds and funds worldwide from a single integrated account. Promoted
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.