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ADT's (NYSE:ADT) Stock Price Has Reduced 12% In The Past Year

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  • ADT

Passive investing in an index fund is a good way to ensure your own returns roughly match the overall market. Active investors aim to buy stocks that vastly outperform the market - but in the process, they risk under-performance. That downside risk was realized by ADT Inc. (NYSE:ADT) shareholders over the last year, as the share price declined 12%. That's disappointing when you consider the market returned 20%. ADT may have better days ahead, of course; we've only looked at a one year period. It's down 38% in about a quarter. We note that the company has reported results fairly recently; and the market is hardly delighted. You can check out the latest numbers in our company report.

See our latest analysis for ADT

ADT isn't currently profitable, so most analysts would look to revenue growth to get an idea of how fast the underlying business is growing. Generally speaking, companies without profits are expected to grow revenue every year, and at a good clip. As you can imagine, fast revenue growth, when maintained, often leads to fast profit growth.

In the last year ADT saw its revenue grow by 5.7%. While that may seem decent it isn't great considering the company is still making a loss. Given this lacklustre revenue growth, the share price drop of 12% seems pretty appropriate. It's important not to lose sight of the fact that profitless companies must grow. So remember, if you buy a profitless company then you risk being a profitless investor.

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

earnings-and-revenue-growth
earnings-and-revenue-growth

If you are thinking of buying or selling ADT stock, you should check out this FREE detailed 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. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. As it happens, ADT's TSR for the last year was -2.5%, 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 ADT shareholders are down 2.5% for the year (even including dividends), the market itself is up 20%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. Notably, the loss over the last year isn't as bad as the 38% drop in the last three months. This probably signals that the business has recently disappointed shareholders - it will take time to win them back. While it is well worth considering the different impacts that market conditions can have on the share price, there are other factors that are even more important. To that end, you should be aware of the 5 warning signs we've spotted with ADT .

If you are like me, then you will not want to miss this free list of growing 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 US exchanges.

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. 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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com.