Despite currently being unprofitable, Scully Royalty (NYSE:SRL) has delivered a 44% return to shareholders over 5 years
It might be of some concern to shareholders to see the Scully Royalty Ltd. (NYSE:SRL) share price down 14% in the last month. But the silver lining is the stock is up over five years. Unfortunately its return of 28% is below the market return of 62%. While the long term returns are impressive, we do have some sympathy for those who bought more recently, given the 24% drop, in the last year.
In light of the stock dropping 11% in the past week, we want to investigate the longer term story, and see if fundamentals have been the driver of the company's positive five-year return.
Check out our latest analysis for Scully Royalty
Because Scully Royalty made a loss in the last twelve months, we think the market is probably more focussed on revenue and revenue growth, at least for now. When a company doesn't make profits, we'd generally expect to see good revenue growth. That's because fast revenue growth can be easily extrapolated to forecast profits, often of considerable size.
Over the last half decade Scully Royalty's revenue has actually been trending down at about 27% per year. The falling revenue is arguably somewhat reflected in the lacklustre return of 5% per year over that time. Arguably that's not bad given the soft revenue and loss-making position. We'd keep an eye on changes in the trend - there may be an opportunity if the company returns to growth.
The graphic below depicts how earnings and revenue have changed over time (unveil the exact values by clicking on the image).
You can see how its balance sheet has strengthened (or weakened) over time in this free interactive graphic.
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. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. As it happens, Scully Royalty's TSR for the last 5 years was 44%, which exceeds the share price return mentioned earlier. And there's no prize for guessing that the dividend payments largely explain the divergence!
A Different Perspective
Scully Royalty shareholders are down 19% for the year (even including dividends), but the market itself is up 3.9%. Even the share prices of good stocks drop sometimes, but we want to see improvements in the fundamental metrics of a business, before getting too interested. On the bright side, long term shareholders have made money, with a gain of 7% 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. It's always interesting to track share price performance over the longer term. But to understand Scully Royalty better, we need to consider many other factors. Case in point: We've spotted 2 warning signs for Scully Royalty you should be aware of, and 1 of them is a bit concerning.
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 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.
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