Did United Fire Group’s (NASDAQ:UFCS) Share Price Deserve to Gain 53%?

United Fire Group, Inc. (NASDAQ:UFCS) shareholders might be concerned after seeing the share price drop 19% in the last quarter. But the silver lining is the stock is up over five years. Unfortunately its return of 53% is below the market return of 69%.

View our latest analysis for United Fire Group

While United Fire Group made a small profit, in the last year, we think that the market is probably more focussed on the top line growth at the moment. 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 United Fire Group saw its revenue grow at 3.8% per year. Put simply, that growth rate fails to impress. While it’s hard to say just how much value the company added over five years, the annualised share price gain of 8.9% seems about right. We’d be looking for the underlying business to grow revenue a bit faster.

Depicted in the graphic below, you’ll see revenue and earnings over time. If you want more detail, you can click on the chart itself.

NasdaqGS:UFCS Income Statement, April 9th 2019
NasdaqGS:UFCS Income Statement, April 9th 2019

This free interactive report on United Fire Group’s balance sheet strength is a great place to start, if you want to investigate the stock further.

What About Dividends?

It is important to consider the total shareholder return, as well as the share price return, for any given stock. 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 United Fire Group the TSR over the last 5 years was 82%, which is better than the share price return mentioned above. And there’s no prize for guessing that the dividend payments largely explain the divergence!

A Different Perspective

While the broader market gained around 12% in the last year, United Fire Group shareholders lost 2.1% (even including dividends). However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. Longer term investors wouldn’t be so upset, since they would have made 13%, each year, over five years. If the fundamental data continues to indicate long term sustainable growth, the current sell-off could be an opportunity worth considering. Most investors take the time to check the data on insider transactions. You can click here to see if insiders have been buying or selling.

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.

We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.

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.