The EXFO (TSE:EXF) Share Price Is Up 37% And Shareholders Are Holding On
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Stock pickers are generally looking for stocks that will outperform the broader market. And while active stock picking involves risks (and requires diversification) it can also provide excess returns. To wit, the EXFO share price has climbed 37% in five years, easily topping the market return of 9.3% (ignoring dividends). On the other hand, the more recent gains haven't been so impressive, with shareholders gaining just 3.4%.
View our latest analysis for EXFO
Because EXFO 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 5 years EXFO saw its revenue grow at 5.6% per year. Put simply, that growth rate fails to impress. While it's hard to say just how much value the company added over five years, the annualised share price gain of 6.4% seems about right. We'd be looking for the underlying business to grow revenue a bit faster.
The graphic below depicts how earnings and revenue have changed over time (unveil the exact values by clicking on the image).
If you are thinking of buying or selling EXFO stock, you should check out this FREE detailed report on its balance sheet.
A Different Perspective
It's nice to see that EXFO shareholders have received a total shareholder return of 3.4% over the last year. However, the TSR over five years, coming in at 6.4% per year, is even more impressive. The pessimistic view would be that be that the stock has its best days behind it, but on the other hand the price might simply be moderating while the business itself continues to execute. 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 risks, for instance. Every company has them, and we've spotted 1 warning sign for EXFO you should know about.
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 CA 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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