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Introducing Fletcher Building (NZSE:FBU), The Stock That Zoomed 112% In The Last Year

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When you buy shares in a company, there is always a risk that the price drops to zero. On the other hand, if you find a high quality business to buy (at the right price) you can more than double your money! For example, the Fletcher Building Limited (NZSE:FBU) share price has soared 112% in the last year. Most would be very happy with that, especially in just one year! Having said that, the longer term returns aren't so impressive, with stock gaining just 5.5% in three years.

View our latest analysis for Fletcher Building

Fletcher Building wasn't profitable in the last twelve months, it is unlikely we'll see a strong correlation between its share price and its earnings per share (EPS). Arguably revenue is our next best option. Shareholders of unprofitable companies usually expect strong revenue growth. As you can imagine, fast revenue growth, when maintained, often leads to fast profit growth.

In the last year Fletcher Building saw its revenue shrink by 9.2%. So we would not have expected the share price to rise 112%. This is a good example of how buyers can push up prices even before the fundamental metrics show much growth. It's quite likely the revenue fall was already priced in, anyway.

The graphic below depicts how earnings and revenue have changed over time (unveil the exact values by clicking on the image).

earnings-and-revenue-growth
earnings-and-revenue-growth

Fletcher Building is well known by investors, and plenty of clever analysts have tried to predict the future profit levels. So it makes a lot of sense to check out what analysts think Fletcher Building will earn in the future (free analyst consensus estimates)

What About Dividends?

When looking at investment returns, it is important to consider the difference between total shareholder return (TSR) and share price return. The TSR incorporates the value of any spin-offs or discounted capital raisings, along with any dividends, based on the assumption that the dividends are reinvested. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. We note that for Fletcher Building the TSR over the last year was 116%, which is better than the share price return mentioned above. This is largely a result of its dividend payments!

A Different Perspective

We're pleased to report that Fletcher Building shareholders have received a total shareholder return of 116% over one year. Of course, that includes the dividend. That certainly beats the loss of about 0.6% per year over the last half decade. This makes us a little wary, but the business might have turned around its fortunes. While it is well worth considering the different impacts that market conditions can have on the share price, there are other factors that are even more important. Even so, be aware that Fletcher Building is showing 1 warning sign in our investment analysis , you should know about...

But note: Fletcher Building may not be the best stock to buy. So take a peek at this free list of interesting companies with past earnings growth (and further growth forecast).

Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on NZ 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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.