Investing in Shawcor (TSE:SCL) three years ago would have delivered you a 220% gain
It might seem bad, but the worst that can happen when you buy a stock (without leverage) is that its share price goes to zero. But if you buy shares in a really great company, you can more than double your money. To wit, the Shawcor Ltd. (TSE:SCL) share price has flown 220% in the last three years. Most would be happy with that. And in the last month, the share price has gained 34%. We note that Shawcor reported its financial results recently; luckily, you can catch up on the latest revenue and profit numbers in our company report.
With that in mind, it's worth seeing if the company's underlying fundamentals have been the driver of long term performance, or if there are some discrepancies.
View our latest analysis for Shawcor
We don't think that Shawcor's modest trailing twelve month profit has the market's full attention at the moment. We think revenue is probably a better guide. As a general rule, we think this kind of company is more comparable to loss-making stocks, since the actual profit is so low. For shareholders to have confidence a company will grow profits significantly, it must grow revenue.
In the last 3 years Shawcor saw its revenue shrink by 2.1% per year. So we wouldn't have expected the share price to gain 47% per year, but it has. It's fair to say shareholders are definitely counting on a bright future.
The company's revenue and earnings (over time) are depicted in the image below (click to see the exact numbers).
We know that Shawcor has improved its bottom line over the last three years, but what does the future have in store? This free interactive report on Shawcor's balance sheet strength is a great place to start, if you want to investigate the stock further.
A Different Perspective
We're pleased to report that Shawcor shareholders have received a total shareholder return of 164% over one year. There's no doubt those recent returns are much better than the TSR loss of 5% per year over five years. 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. Consider for instance, the ever-present spectre of investment risk. We've identified 1 warning sign with Shawcor , and understanding them should be part of your investment process.
We will like Shawcor better if we see some big insider buys. While we wait, check out this free list of growing companies with considerable, recent, insider buying.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on Canadian exchanges.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.
This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. 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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