While it may not be enough for some shareholders, we think it is good to see the Front Yard Residential Corporation (NYSE:RESI) share price up 18% in a single quarter. But over the last half decade, the stock has not performed well. In fact, the share price is down 63%, which falls well short of the return you could get by buying an index fund.
Front Yard Residential isn’t currently profitable, so most analysts would look to revenue growth to get an idea of how fast the underlying business is growing. 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 half a decade Front Yard Residential reduced its trailing twelve month revenue by 22% for each year. That puts it in an unattractive cohort, to put it mildly. Arguably, the market has responded appropriately to this business performance by sending the share price down 18% (annualized) in the same time period. We don’t generally like to own companies that lose money and don’t grow revenues. You might be better off spending your money on a leisure activity. This looks like a really risky stock to buy, at a glance.
You can see how revenue and earnings have changed over time in the image below, (click on the chart to see cashflow).
We like that insiders have been buying shares in the last twelve months. Even so, future earnings will be far more important to whether current shareholders make money. So we recommend checking out this free report showing consensus forecasts
What About Dividends?
As well as measuring the share price return, investors should also consider the total shareholder return (TSR). 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. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. As it happens, Front Yard Residential’s TSR for the last 5 years was -47%, 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
It’s nice to see that Front Yard Residential shareholders have received a total shareholder return of 14% over the last year. Of course, that includes the dividend. That certainly beats the loss of about 12% per year over the last half decade. We generally put more weight on the long term performance over the short term, but the recent improvement could hint at a (positive) inflection point within the business. It is all well and good that insiders have been buying shares, but we suggest you check here to see what price insiders were buying at.
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.
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If you spot an error that warrants correction, please contact the editor at email@example.com. 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.