Those who invested in TAT Technologies (NASDAQ:TATT) three years ago are up 93%
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, TAT Technologies Ltd. (NASDAQ:TATT) shareholders have seen the share price rise 93% over three years, well in excess of the market return (33%, not including dividends). On the other hand, the returns haven't been quite so good recently, with shareholders up just 25%.
So let's investigate and see if the longer term performance of the company has been in line with the underlying business' progress.
Check out our latest analysis for TAT Technologies
While TAT Technologies made a small profit, in the last year, we think that the market is probably more focussed on the top line growth at the moment. 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 3 years TAT Technologies saw its revenue shrink by 3.7% per year. The revenue growth might be lacking but the share price has gained 25% each year in that time. Unless the company is going to make profits soon, we would be pretty cautious about it.
The image below shows how earnings and revenue have tracked over time (if you click on the image you can see greater detail).
You can see how its balance sheet has strengthened (or weakened) over time in this free interactive graphic.
A Different Perspective
It's nice to see that TAT Technologies shareholders have received a total shareholder return of 25% over the last year. There's no doubt those recent returns are much better than the TSR loss of 0.6% per year over five years. This makes us a little wary, but the business might have turned around its fortunes. I find it very interesting to look at share price over the long term as a proxy for business performance. But to truly gain insight, we need to consider other information, too. Consider for instance, the ever-present spectre of investment risk. We've identified 3 warning signs with TAT Technologies (at least 1 which is a bit unpleasant) , and understanding them should be part of your investment process.
We will like TAT Technologies better if we see some big insider buys. While we wait, check out this free list of growing companies with considerable, recent, insider buying.
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.
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