In order to justify the effort of selecting individual stocks, it's worth striving to beat the returns from a market index fund. But if you try your hand at stock picking, your risk returning less than the market. Unfortunately, that's been the case for longer term CEIBA Investments Limited (LON:CBA) shareholders, since the share price is down 35% in the last three years, falling well short of the market return of around 24%.
Now let's have a look at the company's fundamentals, and see if the long term shareholder return has matched the performance of the underlying business.
CEIBA Investments 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. Some companies are willing to postpone profitability to grow revenue faster, but in that case one does expect good top-line growth.
You can see below how earnings and revenue have changed over time (discover the exact values by clicking on the image).
Take a more thorough look at CEIBA Investments' financial health with this free report on its balance sheet.
What about the Total Shareholder Return (TSR)?
Investors should note that there's a difference between CEIBA Investments' total shareholder return (TSR) and its share price change, which we've covered above. 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 and spin-offs. Its history of dividend payouts mean that CEIBA Investments' TSR, which was a 31% drop over the last 3 years, was not as bad as the share price return.
A Different Perspective
The last twelve months weren't great for CEIBA Investments shares, which cost holders 2.9%, while the market was up about 28%. Of course the long term matters more than the short term, and even great stocks will sometimes have a poor year. However, the loss over the last year isn't as bad as the 9% per annum loss investors have suffered over the last three years. We would want clear information suggesting the company will grow, before taking the view that the share price will stabilize. 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. Case in point: We've spotted 1 warning sign for CEIBA Investments you should be aware of.
For those who like to find winning investments this free list of growing companies with recent insider purchasing, could be just the ticket.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on GB exchanges.
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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