It is doubtless a positive to see that the Bel Fuse Inc. (NASDAQ:BELF.B) share price has gained some 47% in the last three months. But that cannot eclipse the less-than-impressive returns over the last three years. Truth be told the share price declined 45% in three years and that return, Dear Reader, falls short of what you could have got from passive investing with an index fund.
We don’t think that Bel Fuse’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. For shareholders to have confidence a company will grow profits significantly, it must grow revenue.
Over three years, Bel Fuse grew revenue at 3.1% per year. That’s not a very high growth rate considering it doesn’t make profits. The stock dropped 18% during that time. Shareholders will probably be hoping growth picks up soon. But ultimately the key will be whether the company can become profitability.
The company’s revenue and earnings (over time) are depicted in the image below.
We know that Bel Fuse has improved its bottom line over the last three years, but what does the future have in store? It might be well worthwhile taking a look at our free report on how its financial position has changed over time.
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. It’s fair to say that the TSR gives a more complete picture for stocks that pay a dividend. We note that for Bel Fuse the TSR over the last 3 years was -43%, which is better than the share price return mentioned above. This is largely a result of its dividend payments!
A Different Perspective
Bel Fuse shareholders are down 11% for the year (even including dividends) , but the market itself is up 21%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. Regrettably, last year’s performance caps off a bad run, with the shareholders facing a total loss of 5.5% per year over five years. Generally speaking long term share price weakness can be a bad sign, though contrarian investors might want to research the stock in hope of a turnaround. Before spending more time on Bel Fuse it might be wise to click here to see if insiders have been buying or selling shares.
If you would prefer to check out another company — one with potentially superior financials — then do not miss this free list of companies that have proven they can grow earnings.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on US exchanges.
If you spot an error that warrants correction, please contact the editor at firstname.lastname@example.org. 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.
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