- United States
- Metals and Mining
Strong week for Kaiser Aluminum (NASDAQ:KALU) shareholders doesn't alleviate pain of five-year loss
This week we saw the Kaiser Aluminum Corporation (NASDAQ:KALU) share price climb by 15%. But if you look at the last five years the returns have not been good. You would have done a lot better buying an index fund, since the stock has dropped 27% in that half decade.
On a more encouraging note the company has added US$147m to its market cap in just the last 7 days, so let's see if we can determine what's driven the five-year loss for shareholders.
Check out our latest analysis for Kaiser Aluminum
Kaiser Aluminum 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. When a company doesn't make profits, we'd generally expect to see good revenue growth. As you can imagine, fast revenue growth, when maintained, often leads to fast profit growth.
Over five years, Kaiser Aluminum grew its revenue at 20% per year. That's well above most other pre-profit companies. The share price drop of 5% per year over five years would be considered let down. So you might argue the Kaiser Aluminum should get more credit for its rather impressive revenue growth over the period. If that's the case, now might be the smart time to take a close look at it.
The company's revenue and earnings (over time) are depicted in the image below (click to see the exact numbers).
Take a more thorough look at Kaiser Aluminum's financial health with this free report on its balance sheet.
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. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. We note that for Kaiser Aluminum the TSR over the last 5 years was -15%, 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 lost about 15% in the twelve months, Kaiser Aluminum shareholders did even worse, losing 20% (even including dividends). However, it could simply be that the share price has been impacted by broader market jitters. It might be worth keeping an eye on the fundamentals, in case there's a good opportunity. Unfortunately, last year's performance may indicate unresolved challenges, given that it was worse than the annualised loss of 3% over the last half decade. We realise that Baron Rothschild has said investors should "buy when there is blood on the streets", but we caution that investors should first be sure they are buying a high quality business. It's always interesting to track share price performance over the longer term. But to understand Kaiser Aluminum 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 Kaiser Aluminum , and understanding them should be part of your investment process.
Of course, you might find a fantastic investment by looking elsewhere. So take a peek at this free list of companies we expect will grow earnings.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on American exchanges.
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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. 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.
Kaiser Aluminum Corporation, together with its subsidiaries, engages in manufacture and sale of semi-fabricated specialty aluminum mill products in the United States and internationally.
Good value with moderate growth potential.