By buying an index fund, you can roughly match the market return with ease. But if you buy good businesses at attractive prices, your portfolio returns could exceed the average market return. For example, A.S. Roma S.P.A. (BIT:ASR) shareholders have seen the share price rise 29% over three years, well in excess of the market return (12%, not including dividends). On the other hand, the returns haven't been quite so good recently, with shareholders up just 8.1%.
Because A.S. Roma is loss-making, we think the market is probably more focussed on revenue and revenue growth, at least for now. Generally speaking, companies without profits are expected to grow revenue every year, and at a good clip. Some companies are willing to postpone profitability to grow revenue faster, but in that case one does expect good top-line growth.
Over the last three years A.S. Roma has grown its revenue at 10% annually. That's pretty nice growth. While the share price has done well, compounding at 8.7% yearly, over three years, that move doesn't seem over the top. If that's the case, then it could be well worth while to research the growth trajectory. Of course, it's always worth considering funding risks when a company isn't profitable.
You can see below how earnings and revenue have changed over time (discover the exact values by clicking on the image).
Take a more thorough look at A.S. Roma's financial health with this free report on its balance sheet.
What about the Total Shareholder Return (TSR)?
We've already covered A.S. Roma's 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. We note that A.S. Roma's TSR, at 34% is higher than its share price return of 29%. When you consider it hasn't been paying a dividend, this data suggests shareholders have benefitted from a spin-off, or had the opportunity to acquire attractively priced shares in a discounted capital raising.
A Different Perspective
A.S. Roma shareholders are up 8.1% for the year. But that was short of the market average. But at least that's still a gain! Over five years the TSR has been a reduction of 2.4% per year, over five years. So this might be a sign the business has turned its fortunes around. Shareholders might want to examine this detailed historical graph of past earnings, revenue and cash flow.
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 IT exchanges.
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.
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.