Despite shrinking by R155m in the past week, AYO Technology Solutions (JSE:AYO) shareholders are still up 6.3% over 3 years

While not a mind-blowing move, it is good to see that the AYO Technology Solutions Limited (JSE:AYO) share price has gained 17% in the last three months. But that cannot eclipse the less-than-impressive returns over the last three years. After all, the share price is down 42% in the last three years, significantly under-performing the market.

If the past week is anything to go by, investor sentiment for AYO Technology Solutions isn't positive, so let's see if there's a mismatch between fundamentals and the share price.

Before we look at the performance, you might like to know that our analysis indicates that AYO is potentially undervalued!

AYO Technology Solutions isn't currently profitable, so most analysts would look to revenue growth to get an idea of how fast the underlying business is growing. Shareholders of unprofitable companies usually expect strong revenue growth. That's because it's hard to be confident a company will be sustainable if revenue growth is negligible, and it never makes a profit.

In the last three years, AYO Technology Solutions saw its revenue grow by 2.8% per year, compound. Given it's losing money in pursuit of growth, we are not really impressed with that. Indeed, the stock dropped 12% over the last three years. Shareholders will probably be hoping growth picks up soon. But the real upside for shareholders will be if the company can start generating profits.

The graphic below depicts how earnings and revenue have changed over time (unveil the exact values by clicking on the image).

This free interactive report on AYO Technology Solutions' 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. 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. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. In the case of AYO Technology Solutions, it has a TSR of 6.3% for the last 3 years. That exceeds its share price return that we previously mentioned. This is largely a result of its dividend payments!

A Different Perspective

We're pleased to report that AYO Technology Solutions rewarded shareholders with a total shareholder return of 24% over the last year. That includes the value of the dividend. That gain actually surpasses the 2.1% TSR it generated (per year) over three years. The improving returns to shareholders suggests the stock is becoming more popular with time. It's always interesting to track share price performance over the longer term. But to understand AYO Technology Solutions better, we need to consider many other factors. For instance, we've identified 3 warning signs for AYO Technology Solutions (2 are a bit unpleasant) that you should be aware of.

Of course AYO Technology Solutions may not be the best stock to buy. So you may wish to see this free collection of growth stocks.

Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on ZA 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.