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As an investor its worth striving to ensure your overall portfolio beats the market average. But in any portfolio, there are likely to be some stocks that fall short of that benchmark. Unfortunately, that's been the case for longer term CEIBA Investments Limited (LON:CBA) shareholders, since the share price is down 42% in the last three years, falling well short of the market decline of around 8.4%. And the ride hasn't got any smoother in recent times over the last year, with the price 30% lower in that time.
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.
Given that CEIBA Investments 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.
In the last three years CEIBA Investments saw its revenue shrink by 18% per year. That means its revenue trend is very weak compared to other loss making companies. With revenue in decline, the share price decline of 13% per year is hardly undeserved. It would probably be worth asking whether the company can fund itself to profitability. Of course, it is possible for businesses to bounce back from a revenue drop - but we'd want to see that before getting interested.
The company's revenue and earnings (over time) are depicted in the image below (click to see the exact numbers).
This free interactive report on CEIBA Investments' balance sheet strength is a great place to start, if you want to investigate the stock further.
What about the Total Shareholder Return (TSR)?
We've already covered CEIBA Investments' share price action, but we should also mention its total shareholder return (TSR). The TSR attempts to capture the value of dividends (as if they were reinvested) as well as any spin-offs or discounted capital raisings offered to shareholders. CEIBA Investments' TSR of was a loss of 39% for the 3 years. That wasn't as bad as its share price return, because it has paid dividends.
A Different Perspective
The last twelve months weren't great for CEIBA Investments shares, which performed worse than the market, costing holders 30%. The market shed around 1.3%, no doubt weighing on the stock price. The three-year loss of 12% per year isn't as bad as the last twelve months, suggesting that the company has not been able to convince the market it has solved its problems. Although Baron Rothschild famously said to "buy when there's blood in the streets, even if the blood is your own", he also focusses on high quality stocks with solid prospects. 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 3 warning signs for CEIBA Investments you should be aware of, and 1 of them is a bit concerning.
If you are like me, then you will not want to miss this free list of growing companies that insiders are buying.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on GB exchanges.
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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.