CyrusOne (NASDAQ:CONE) Has Compensated Shareholders With A Respectable 75% Return On Their Investment
When you buy and hold a stock for the long term, you definitely want it to provide a positive return. But more than that, you probably want to see it rise more than the market average. Unfortunately for shareholders, while the CyrusOne Inc. (NASDAQ:CONE) share price is up 49% in the last five years, that's less than the market return. Zooming in, the stock is up a respectable 5.5% in the last year.
View our latest analysis for CyrusOne
We don't think that CyrusOne'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.
For the last half decade, CyrusOne can boast revenue growth at a rate of 17% per year. That's well above most pre-profit companies. It's nice to see shareholders have made a profit, but the gain of 8% over the period isn't that impressive compared to the overall market. You could argue the market is still pretty skeptical, given the growing revenues. It could be that the stock was previously over-priced - but if you're looking for underappreciated growth stocks, these numbers indicate that there might be an opportunity here.
The graphic below depicts how earnings and revenue have changed over time (unveil the exact values by clicking on the image).
It's probably worth noting that the CEO is paid less than the median at similar sized companies. But while CEO remuneration is always worth checking, the really important question is whether the company can grow earnings going forward. So we recommend checking out this free report showing consensus forecasts
What About Dividends?
When looking at investment returns, it is important to consider the difference between total shareholder return (TSR) and share price return. The TSR incorporates the value of any spin-offs or discounted capital raisings, along with any dividends, based on the assumption that the dividends are reinvested. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. We note that for CyrusOne the TSR over the last 5 years was 75%, which is better than the share price return mentioned above. This is largely a result of its dividend payments!
A Different Perspective
CyrusOne provided a TSR of 8.6% over the last twelve months. Unfortunately this falls short of the market return. On the bright side, the longer term returns (running at about 12% a year, over half a decade) look better. It's quite possible the business continues to execute with prowess, even as the share price gains are slowing. 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. Consider for instance, the ever-present spectre of investment risk. We've identified 4 warning signs with CyrusOne (at least 1 which is potentially serious) , 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 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.
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