Melrose Industries (LON:MRO) shareholders have earned a 118% return over the last year
Melrose Industries PLC (LON:MRO) shareholders might be concerned after seeing the share price drop 10% in the last month. But that doesn't change the reality that over twelve months the stock has done really well. After all, the share price is up a market-beating 51% in that time.
So let's investigate and see if the longer term performance of the company has been in line with the underlying business' progress.
See our latest analysis for Melrose Industries
Given that Melrose Industries 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. Generally speaking, companies without profits are expected to grow revenue every year, and at a good clip. That's because fast revenue growth can be easily extrapolated to forecast profits, often of considerable size.
In the last year Melrose Industries saw its revenue grow by 70%. That's stonking growth even when compared to other loss-making stocks. The solid 51% share price gain goes down pretty well, but it's not necessarily as good as you might expect given the top notch revenue growth. If that's the case, now might be the time to take a close look at Melrose Industries. Since we evolved from monkeys, we think in linear terms by nature. So if growth goes exponential, opportunity may exist for the enlightened.
The company's revenue and earnings (over time) are depicted in the image below (click to see the exact numbers).
We like that insiders have been buying shares in the last twelve months. Even so, future earnings will be far more important to whether current shareholders make money. So it makes a lot of sense to check out what analysts think Melrose Industries will earn in the future (free profit forecasts).
What About Dividends?
It is important to consider the total shareholder return, as well as the share price return, for any given stock. 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, Melrose Industries' TSR for the last 1 year was 118%, which exceeds the share price return mentioned earlier. The dividends paid by the company have thusly boosted the total shareholder return.
A Different Perspective
It's nice to see that Melrose Industries shareholders have received a total shareholder return of 118% over the last year. And that does include the dividend. That's better than the annualised return of 6% over half a decade, implying that the company is doing better recently. In the best case scenario, this may hint at some real business momentum, implying that now could be a great time to delve deeper. I find it very interesting to look at share price over the long term as a proxy for business performance. But to truly gain insight, we need to consider other information, too. Case in point: We've spotted 1 warning sign for Melrose Industries you should be aware of.
Melrose Industries is not the only stock that insiders are buying. 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 British 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.
