While it may not be enough for some shareholders, we think it is good to see the LSI Industries Inc. (NASDAQ:LYTS) share price up 22% in a single quarter. Meanwhile over the last three years the stock has dropped hard. Indeed, the share price is down a tragic 62% in the last three years. So the improvement may be a real relief to some. While many would remain nervous, there could be further gains if the business can put its best foot forward.
View our latest analysis for LSI Industries
Because LSI Industries is loss-making, 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. That’s because it’s hard to be confident a company will be sustainable if revenue growth is negligible, and it never makes a profit.
In the last three years, LSI Industries saw its revenue grow by 2.2% per year, compound. Given it’s losing money in pursuit of growth, we are not really impressed with that. It’s likely this weak growth has contributed to an annualised return of 28% for the last three years. When a stock falls hard like this, some investors like to add the company to a watchlist (in case the business recovers, longer term). After all, growing a business isn’t easy, and the process will not always be smooth.
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 LSI Industries in this interactive graph of future profit estimates.
What About Dividends?
When looking at investment returns, it is important to consider the difference between total shareholder return (TSR) and share price return. Whereas the share price return only reflects the change in the share price, the TSR includes the value of dividends (assuming they were reinvested) and the benefit of any discounted capital raising or spin-off. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. We note that for LSI Industries the TSR over the last 3 years was -58%, which is better than the share price return mentioned above. This is largely a result of its dividend payments!
A Different Perspective
While the broader market gained around 2.2% in the last year, LSI Industries shareholders lost 2.6% (even including dividends). However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. Unfortunately, longer term shareholders are suffering worse, given the loss of 8.5% doled out over the last five years. We’d need to see some sustained improvements in the key metrics before we could muster much enthusiasm. If you want to research this stock further, the data on insider buying is an obvious place to start. You can click here to see who has been buying shares – and the price they paid.
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 US exchanges.
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If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. 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. Simply Wall St has no position in the stocks mentioned. Thank you for reading.