Seven West Media Limited (ASX:SWM) shareholders will doubtless be very grateful to see the share price up 133% in the last quarter. But don't envy holders -- looking back over 5 years the returns have been really bad. The share price has failed to impress anyone , down a sizable 58% during that time. So we're not so sure if the recent bounce should be celebrated. We'd err towards caution given the long term under-performance.
Because Seven West Media made a loss in the last twelve months, we think the market is probably more focussed on revenue and revenue growth, at least for now. Shareholders of unprofitable companies usually expect strong revenue growth. That's because fast revenue growth can be easily extrapolated to forecast profits, often of considerable size.
In the last five years Seven West Media saw its revenue shrink by 4.6% per year. While far from catastrophic that is not good. With neither profit nor revenue growth, the loss of 10% per year doesn't really surprise us. The chance of imminent investor enthusiasm for this stock seems slimmer than Louise Brooks. Ultimately, it may be worth watching - should revenue pick up, the share price might follow.
You can see below how earnings and revenue have changed over time (discover the exact values by clicking on the image).
This free interactive report on Seven West Media's balance sheet strength is a great place to start, if you want to investigate the stock further.
What about the Total Shareholder Return (TSR)?
Investors should note that there's a difference between Seven West Media's total shareholder return (TSR) and its share price change, which we've covered above. Arguably the TSR is a more complete return calculation because it accounts for the value of dividends (as if they were reinvested), along with the hypothetical value of any discounted capital that have been offered to shareholders. Seven West Media's TSR of was a loss of 51% for the 5 years. That wasn't as bad as its share price return, because it has paid dividends.
A Different Perspective
Seven West Media shareholders are down 1.6% for the year, but the market itself is up 4.0%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. Unfortunately, longer term shareholders are suffering worse, given the loss of 9% doled out over the last five years. We'd need to see some sustained improvements in the key metrics before we could muster much enthusiasm. While it is well worth considering the different impacts that market conditions can have on the share price, there are other factors that are even more important. Take risks, for example - Seven West Media has 1 warning sign we think you should be aware of.
Of course Seven West Media 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 AU exchanges.
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. 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.
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