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Such Is Life: How Netcall (LON:NET) Shareholders Saw Their Shares Drop 53%

Simply Wall St
·3 min read

Netcall plc (LON:NET) shareholders should be happy to see the share price up 29% in the last month. But that doesn't change the fact that the returns over the last three years have been less than pleasing. After all, the share price is down 53% in the last three years, significantly under-performing the market.

See our latest analysis for Netcall

While Netcall made a small profit, in the last year, we think that the market is probably more focussed on the top line growth at the moment. Generally speaking, we'd consider a stock like this alongside loss-making companies, simply because the quantum of the profit is so low. It would be hard to believe in a more profitable future without growing revenues.

Over three years, Netcall grew revenue at 14% per year. That's a fairly respectable growth rate. That contrasts with the weak share price, which has fallen 22% compounded, over three years. To be frank we're surprised to see revenue growth and share price growth diverge so strongly. So this is one stock that might be worth investigating further, or even adding to your watchlist.

You can see how earnings and revenue have changed over time in the image below (click on the chart to see the exact values).

AIM:NET Income Statement April 20th 2020
AIM:NET Income Statement April 20th 2020

We know that Netcall has improved its bottom line lately, but what does the future have in store? You can see what analysts are predicting for Netcall in this interactive graph of future profit estimates.

What About Dividends?

When looking at investment returns, it is important to consider the difference between total shareholder return (TSR) and share price return. Whereas the share price return only reflects the change in the share price, the TSR includes the value of dividends (assuming they were reinvested) and the benefit of any discounted capital raising or spin-off. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. As it happens, Netcall's TSR for the last 3 years was -50%, which exceeds the share price return mentioned earlier. And there's no prize for guessing that the dividend payments largely explain the divergence!

A Different Perspective

We regret to report that Netcall shareholders are down 44% for the year (even including dividends) . Unfortunately, that's worse than the broader market decline of 17%. However, it could simply be that the share price has been impacted by broader market jitters. It might be worth keeping an eye on the fundamentals, in case there's a good opportunity. Regrettably, last year's performance caps off a bad run, with the shareholders facing a total loss of 8.7% per year over five years. Generally speaking long term share price weakness can be a bad sign, though contrarian investors might want to research the stock in hope of a turnaround. It's always interesting to track share price performance over the longer term. But to understand Netcall better, we need to consider many other factors. Consider risks, for instance. Every company has them, and we've spotted 3 warning signs for Netcall you should know about.

Of course, you might find a fantastic investment by looking elsewhere. So take a peek at this free list of companies we expect will grow earnings.

Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on GB exchanges.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.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.

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. Thank you for reading.