By buying an index fund, you can roughly match the market return with ease. But if you pick the right individual stocks, you could make more than that. For example, SBA Communications Corporation (NASDAQ:SBAC) shareholders have seen the share price rise 97% over three years, well in excess of the market return (39%, not including dividends). On the other hand, the returns haven’t been quite so good recently, with shareholders up just 10%.
We don’t think that SBA Communications’s modest trailing twelve month profit has the market’s full attention at the moment. We think revenue is probably a better guide. Many high growth companies focus on growing revenue before profits, but if revenue is the focus, it really needs to grow. The main reason for this is that fast revenue growth can be readily extrapolated into a profitable future, but stagnant revenue cannot.
Over the last three years SBA Communications has grown its revenue at 4.7% annually. That’s not a very high growth rate considering it doesn’t make profits. In that time the share price is up 25% per year, which is not unreasonable given the revenue gorwth. Ultimately, the important thing is whether the company is trending to profitability. Given the market doesn’t seem too excited about the stock, a closer look at the financial data could pay off, if you can find indications of a stronger growth trend in the future.
The chart below shows how revenue and earnings have changed with time, (if you click on the chart you can see the actual values).
SBA Communications is well known by investors, and plenty of clever analysts have tried to predict the future profit levels. So we recommend checking out this free report showing consensus forecasts
A Different Perspective
It’s good to see that SBA Communications has rewarded shareholders with a total shareholder return of 10% in the last twelve months. However, that falls short of the 14% TSR per annum it has made for shareholders, each year, over five years. The pessimistic view would be that be that the stock has its best days behind it, but on the other hand the price might simply be moderating while the business itself continues to execute. If you would like to research SBA Communications in more detail then you might want to take a look at whether insiders have been buying or selling shares in the company.
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 US exchanges.
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.
If you spot an error that warrants correction, please contact the editor at firstname.lastname@example.org. 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.