The past year for ArcelorMittal South Africa (JSE:ACL) investors has not been profitable
While not a mind-blowing move, it is good to see that the ArcelorMittal South Africa Limited (JSE:ACL) share price has gained 14% in the last three months. But that's not enough to compensate for the decline over the last twelve months. During that time the share price has sank like a stone, descending 69%. Some might say the recent bounce is to be expected after such a bad drop. Arguably, the fall was overdone.
It's worthwhile assessing if the company's economics have been moving in lockstep with these underwhelming shareholder returns, or if there is some disparity between the two. So let's do just that.
Check out our latest analysis for ArcelorMittal South Africa
ArcelorMittal South Africa 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. That's because it's hard to be confident a company will be sustainable if revenue growth is negligible, and it never makes a profit.
In the last twelve months, ArcelorMittal South Africa increased its revenue by 2.1%. While that may seem decent it isn't great considering the company is still making a loss. It's likely this muted growth has contributed to the share price decline of 69% in the last year. Like many holders, we really want to see better revenue growth in companies that lose money. When a stock falls hard like this, it can signal an over-reaction. Our preference is to wait for a fundamental improvements before buying, but now could be a good time for some research.
The graphic below depicts how earnings and revenue have changed over time (unveil the exact values by clicking on the image).
This free interactive report on ArcelorMittal South Africa's balance sheet strength is a great place to start, if you want to investigate the stock further.
A Different Perspective
We regret to report that ArcelorMittal South Africa shareholders are down 69% for the year. Unfortunately, that's worse than the broader market decline of 1.1%. Having said that, it's inevitable that some stocks will be oversold in a falling market. The key is to keep your eyes on the fundamental developments. Unfortunately, last year's performance may indicate unresolved challenges, given that it was worse than the annualised loss of 11% over the last half decade. We realise that Baron Rothschild has said investors should "buy when there is blood on the streets", but we caution that investors should first be sure they are buying a high quality business. It's always interesting to track share price performance over the longer term. But to understand ArcelorMittal South Africa better, we need to consider many other factors. To that end, you should learn about the 2 warning signs we've spotted with ArcelorMittal South Africa (including 1 which is a bit concerning) .
Of course ArcelorMittal South Africa 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 South African 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.
