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, the Feng Ching Metal Corporation (GTSM:2061) share price is up 57% in the last three years, clearly besting the market return of around 30% (not including dividends).
View 3 warning signs we detected for Feng Ching Metal
Because Feng Ching Metal is loss-making, we think the market is probably more focussed on revenue and revenue growth, at least for now. When a company doesnt make profits, wed generally expect to see good revenue growth. Thats because fast revenue growth can be easily extrapolated to forecast profits, often of considerable size.
Over the last three years Feng Ching Metal has grown its revenue at 6.8% annually. Considering the company is losing money, we think that rate of revenue growth is uninspiring. The modest growth is probably broadly reflected in the share price, which is up 16%, per year over 3 years. The real question is when the business will generate profits, and how quickly they will grow. In this sort of situation it can be worth putting the stock on your watchlist. If it can become profitable, then even moderate revenue growth could grow profits quickly.
The graphic below depicts how earnings and revenue have changed over time (unveil the exact values by clicking on the image).
If you are thinking of buying or selling Feng Ching Metal stock, you should check out this FREE detailed report on its balance sheet.
Investors should note that theres a difference between Feng Ching Metals total shareholder return (TSR) and its share price change, which weve 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. Dividends have been really beneficial for Feng Ching Metal shareholders, and that cash payout contributed to why its TSR of 66%, over the last 3 years, is better than the share price return.
Its good to see that Feng Ching Metal has rewarded shareholders with a total shareholder return of 52% in the last twelve months. Notably the five-year annualised TSR loss of 7.1% per year compares very unfavourably with the recent share price performance. We generally put more weight on the long term performance over the short term, but the recent improvement could hint at a (positive) inflection point within the business. 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. For example, weve discovered 3 warning signs for Feng Ching Metal which any shareholder or potential investor should be aware of.
If you would prefer to check out another company one with potentially superior financials then do not miss this free list of companies that have proven they can grow earnings.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on TW exchanges.
If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.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.
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Investors Who Bought Feng Ching Metal (GTSM:2061) Shares Three Years Ago Are Now Up 57% - Simply Wall St
