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Leaf Group Ltd. (NYSE:LEAF) shareholders should be happy to see the share price up 15% in the last quarter. But that doesn't change the fact that the returns over the last five years have been less than pleasing. In fact, the share price is down 69%, which falls well short of the return you could get by buying an index fund.
Given that Leaf Group didn't make a profit in the last twelve months, we'll focus on revenue growth to form a quick view of its business development. When a company doesn't make profits, we'd generally expect to see good revenue growth. As you can imagine, fast revenue growth, when maintained, often leads to fast profit growth.
Over half a decade Leaf Group reduced its trailing twelve month revenue by 7.1% for each year. While far from catastrophic that is not good. The share price decline of 21% compound, over five years, is understandable given the company is losing money, and revenue is moving in the wrong direction. The chance of imminent investor enthusiasm for this stock seems slimmer than Louise Brooks. Not that many investors like to invest in companies that are losing money and not growing revenue.
Depicted in the graphic below, you'll see revenue and earnings over time. If you want more detail, you can click on the chart itself.
If you are thinking of buying or selling Leaf Group stock, you should check out this FREE detailed report on its balance sheet.
What about the Total Shareholder Return (TSR)?
Investors should note that there's a difference between Leaf Group's total shareholder return (TSR) and its share price change, which we've covered above. Arguably the TSR is a more complete return calculation because it accounts for the value of dividends (as if they were reinvested), along with the hypothetical value of any discounted capital that have been offered to shareholders. Leaf Group hasn't been paying dividends, but its TSR of -22% exceeds its share price return of -69%, implying it has either spun-off a business, or raised capital at a discount; thereby providing additional value to shareholders.
A Different Perspective
It's good to see that Leaf Group has rewarded shareholders with a total shareholder return of 13% in the last twelve months. There's no doubt those recent returns are much better than the TSR loss of 5.0% per year over five years. This makes us a little wary, but the business might have turned around its fortunes. If you would like to research Leaf Group in more detail then you might want to take a look at whether insiders have been buying or selling shares in the company.
But note: Leaf Group 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 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.