If you want to compound wealth in the stock market, you can do so by buying an index fund. But you can significantly boost your returns by picking above-average stocks. For example, the DRDGOLD Limited (NYSE:DRD) share price is up 90% in the last year, clearly besting than the market return of around 0.3% (not including dividends). So that should have shareholders smiling. Unfortunately the longer term returns are not so good, with the stock falling 41% in the last three years.
Because DRDGOLD is loss-making, 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. Some companies are willing to postpone profitability to grow revenue faster, but in that case one does expect good top-line growth.
DRDGOLD grew its revenue by 3.4% last year. That's not great considering the company is losing money. The modest growth is probably largely reflected in the share price, which is up 90%. That's not a standout result, but it is solid - much like the level of revenue growth. It could be worth keeping an eye on this one, especially if growth accelerates.
The image below shows how earnings and revenue have tracked over time (if you click on the image you can see greater detail).
You can see how its balance sheet has strengthened (or weakened) over time in this free interactive graphic.
What about the Total Shareholder Return (TSR)?
We'd be remiss not to mention the difference between DRDGOLD's total shareholder return (TSR) and its share price return. 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. Dividends have been really beneficial for DRDGOLD shareholders, and that cash payout contributed to why its TSR of 90%, over the last year, is better than the share price return.
A Different Perspective
It's nice to see that DRDGOLD shareholders have received a total shareholder return of 90% over the last year. Of course, that includes the dividend. Since the one-year TSR is better than the five-year TSR (the latter coming in at 12% per year), it would seem that the stock's performance has improved in recent times. In the best case scenario, this may hint at some real business momentum, implying that now could be a great time to delve deeper. You might want to assess this data-rich visualization of its earnings, revenue and cash flow.
If you like to buy stocks alongside management, then you might just love this free list of companies. (Hint: insiders have been buying them).
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on US exchanges.
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.
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. Thank you for reading.