While shareholders of CSP (NASDAQ:CSPI) are in the black over 3 years, those who bought a week ago aren't so fortunate

While CSP Inc. (NASDAQ:CSPI) shareholders are probably generally happy, the stock hasn't had particularly good run recently, with the share price falling 21% in the last quarter. But that doesn't undermine the rather lovely longer-term return, if you measure over the last three years. In three years the stock price has launched 275% higher: a great result. After a run like that some may not be surprised to see prices moderate. The fundamental business performance will ultimately dictate whether the top is in, or if this is a stellar buying opportunity.

While the stock has fallen 11% this week, it's worth focusing on the longer term and seeing if the stocks historical returns have been driven by the underlying fundamentals.

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We don't think that CSP'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 3 years CSP saw its revenue grow at 5.2% per year. That's not a very high growth rate considering it doesn't make profits. In comparison, the share price rise of 55% per year over the last three years is pretty impressive. We'd need to take a closer look at the revenue and profit trends to see whether the improvements might justify that sort of increase. It may be that the market is pretty optimistic about CSP if you look to the bottom line.

You can see below how earnings and revenue have changed over time (discover the exact values by clicking on the image).

It's good to see that there was some significant insider buying in the last three months. That's a positive. On the other hand, we think the revenue and earnings trends are much more meaningful measures of the business. Before buying or selling a stock, we always recommend a close examination of historic growth trends, available here. .

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. As it happens, CSP's TSR for the last 3 years was 285%, which exceeds the share price return mentioned earlier. The dividends paid by the company have thusly boosted the total shareholder return.

A Different Perspective

While the broader market lost about 2.4% in the twelve months, CSP shareholders did even worse, losing 27% (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. On the bright side, long term shareholders have made money, with a gain of 25% per year over half a decade. If the fundamental data continues to indicate long term sustainable growth, the current sell-off could be an opportunity worth considering. I find it very interesting to look at share price over the long term as a proxy for business performance. But to truly gain insight, we need to consider other information, too. Even so, be aware that CSP is showing 1 warning sign in our investment analysis , you should know about...

There are plenty of other companies that have insiders buying up shares. You probably do not want to miss this free list of undervalued small cap companies that insiders are buying.

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.