When you buy and hold a stock for the long term, you definitely want it to provide a positive return. But more than that, you probably want to see it rise more than the market average. Unfortunately for shareholders, while the Natural Alternatives International, Inc. (NASDAQ:NAII) share price is up 63% in the last five years, that's less than the market return. Some buyers are laughing, though, with an increase of 50% in the last year.
We don't think that Natural Alternatives International's modest trailing twelve month profit has the market's full attention at the moment. We think revenue is probably a better guide. As a general rule, we think this kind of company is more comparable to loss-making stocks, since the actual profit is so low. It would be hard to believe in a more profitable future without growing revenues.
In the last 5 years Natural Alternatives International saw its revenue grow at 5.0% per year. Put simply, that growth rate fails to impress. It's probably fair to say that the modest growth is reflected in the modest share price gain of 10% per year. If profitability is likely in the near term, then this might be one to add to your watchlist.
You can see how earnings and revenue have changed over time in the image below (click on the chart to see the exact values).
This free interactive report on Natural Alternatives International's balance sheet strength is a great place to start, if you want to investigate the stock further.
A Different Perspective
It's nice to see that Natural Alternatives International shareholders have received a total shareholder return of 50% over the last year. Since the one-year TSR is better than the five-year TSR (the latter coming in at 10% per year), it would seem that the stock's performance has improved in recent times. Someone with an optimistic perspective could view the recent improvement in TSR as indicating that the business itself is getting better with time. 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. Case in point: We've spotted 6 warning signs for Natural Alternatives International you should be aware of, and 1 of them is potentially serious.
For those who like to find winning investments this free list of growing companies with recent insider purchasing, could be just the ticket.
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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What are the risks and opportunities for Natural Alternatives International?
Price-To-Earnings ratio (6.2x) is below the US market (15.3x)
Does not have a meaningful market cap ($53M)
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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Natural Alternatives International
Natural Alternatives International, Inc. engages in formulating, manufacturing, and marketing nutritional supplements in the United States, Europe, Australia, Asia, Mexico, and Canada.
Excellent balance sheet and slightly overvalued.