For many investors, the main point of stock picking is to generate higher returns than the overall market. But the risk of stock picking is that you will likely buy under-performing companies. We regret to report that long term Marlborough Wine Estates Group Limited (NZSE:MWE) shareholders have had that experience, with the share price dropping 36% in three years, versus a market return of about 31%.
Because Marlborough Wine Estates Group 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. 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, Marlborough Wine Estates Group saw its revenue grow by 8.9% per year, compound. That's a pretty good rate of top-line growth. Shareholders have endured a share price decline of 14% per year. So the market has definitely lost some love for the stock. However, that's in the past now, and it's the future is more important - and the future looks brighter (based on revenue, anyway).
You can see below how earnings and revenue have changed over time (discover the exact values by clicking on the image).
Take a more thorough look at Marlborough Wine Estates Group's financial health with this free report on its balance sheet.
A Different Perspective
Over the last year, Marlborough Wine Estates Group shareholders took a loss of 16%. In contrast the market gained about 2.5%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. The three-year loss of 14% per year isn't as bad as the last twelve months, suggesting that the company has not been able to convince the market it has solved its problems. Although Baron Rothschild famously said to "buy when there's blood in the streets, even if the blood is your own", he also focusses on high quality stocks with solid prospects. 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 5 warning signs with Marlborough Wine Estates Group (at least 2 which make us uncomfortable) , and understanding them should be part of your investment process.
Of course Marlborough Wine Estates Group 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 NZ 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.
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Thank you for reading.