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Gulf Island Fabrication, Inc. (NASDAQ:GIFI) shareholders should be happy to see the share price up 20% in the last quarter. But don’t envy holders — looking back over 5 years the returns have been really bad. In that time the share price has delivered a rude shock to holders, who find themselves down 55% after a long stretch. So we’re hesitant to put much weight behind the short term increase. However, in the best case scenario (far from fait accompli), this improved performance might be sustained.
Gulf Island Fabrication isn’t currently profitable, so most analysts would look to revenue growth to get an idea of how fast the underlying business is growing. 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 five years Gulf Island Fabrication saw its revenue shrink by 27% per year. That’s definitely a weaker result than most pre-profit companies report. Arguably, the market has responded appropriately to this business performance by sending the share price down 15% (annualized) in the same time period. We don’t generally like to own companies that lose money and don’t grow revenues. You might be better off spending your money on a leisure activity. You’d want to research this company pretty thoroughly before buying, it looks a bit too risky for us.
The graphic below shows how revenue and earnings have changed as management guided the business forward. If you want to see cashflow, you can click on the chart.
Balance sheet strength is crucual. It might be well worthwhile taking a look at our free report on how its financial position has changed over time.
A Dividend Lost
The share price return figures discussed above don’t include the value of dividends paid previously, but the total shareholder return (TSR) does. Many would argue the TSR gives a more complete picture of the value a stock brings to its holders. Gulf Island Fabrication’s TSR over the last 5 years is -53%; better than its share price return. Even though the company isn’t paying dividends at the moment, it has done in the past.
A Different Perspective
We’re pleased to report that Gulf Island Fabrication shareholders have received a total shareholder return of 16% over one year. Notably the five-year annualised TSR loss of 14% per year compares very unfavourably with the recent share price performance. This makes us a little wary, but the business might have turned around its fortunes. Most investors take the time to check the data on insider transactions. You can click here to see if insiders have been buying or selling.
Of course Gulf Island Fabrication may not be the best stock to buy. So you may wish to see this free collection of growth stocks.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on US exchanges.
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If you spot an error that warrants correction, please contact the editor at email@example.com. 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.