Smith-Midland (NASDAQ:SMID) shareholders notch a 27% CAGR over 5 years, yet earnings have been shrinking
The most you can lose on any stock (assuming you don't use leverage) is 100% of your money. But when you pick a company that is really flourishing, you can make more than 100%. For instance, the price of Smith-Midland Corporation (NASDAQ:SMID) stock is up an impressive 231% over the last five years. And in the last month, the share price has gained 23%. We note that Smith-Midland reported its financial results recently; luckily, you can catch up on the latest revenue and profit numbers in our company report.
On the back of a solid 7-day performance, let's check what role the company's fundamentals have played in driving long term shareholder returns.
Check out our latest analysis for Smith-Midland
Given that Smith-Midland only made minimal earnings in the last twelve months, we'll focus on revenue to gauge its business development. As a general rule, we think this kind of company is more comparable to loss-making stocks, since the actual profit is so low. For shareholders to have confidence a company will grow profits significantly, it must grow revenue.
In the last 5 years Smith-Midland saw its revenue grow at 5.4% per year. Put simply, that growth rate fails to impress. In comparison, the share price rise of 27% per year over the last half a decade is pretty impressive. Shareholders should be pretty happy with that, although interested investors might want to examine the financial data more closely to see if the gains are really justified. It may be that the market is pretty optimistic about Smith-Midland.
You can see below how earnings and revenue have changed over time (discover the exact values by clicking on the image).
If you are thinking of buying or selling Smith-Midland stock, you should check out this FREE detailed report on its balance sheet.
What About The Total Shareholder Return (TSR)?
We've already covered Smith-Midland's share price action, but we should also mention its total shareholder return (TSR). 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. Its history of dividend payouts mean that Smith-Midland's TSR of 236% over the last 5 years is better than the share price return.
A Different Perspective
It's nice to see that Smith-Midland shareholders have received a total shareholder return of 19% over the last year. Having said that, the five-year TSR of 27% a year, is even better. 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. 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. Case in point: We've spotted 2 warning signs for Smith-Midland you should be aware of.
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 American 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.
