When we invest, we're generally looking for stocks that outperform the market average. And the truth is, you can make significant gains if you buy good quality businesses at the right price. For example, the Novatti Group Limited (ASX:NOV) share price is up 85% in the last 5 years, clearly besting the market return of around 40% (ignoring dividends).
Because Novatti Group 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. Generally speaking, companies without profits are expected to grow revenue every year, and at a good clip. That's because fast revenue growth can be easily extrapolated to forecast profits, often of considerable size.
For the last half decade, Novatti Group can boast revenue growth at a rate of 32% per year. Even measured against other revenue-focussed companies, that's a good result. While the compound gain of 13% per year is good, it's not unreasonable given the strong revenue growth. If you think there could be more growth to come, now might be the time to take a close look at Novatti Group. Of course, you'll have to research the business more fully to figure out if this is an attractive opportunity.
The company's revenue and earnings (over time) are depicted in the image below (click to see the exact numbers).
This free interactive report on Novatti Group'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)?
We've already covered Novatti Group's share price action, but we should also mention its total shareholder return (TSR). The TSR attempts to capture the value of dividends (as if they were reinvested) as well as any spin-offs or discounted capital raisings offered to shareholders. Novatti Group hasn't been paying dividends, but its TSR of 90% exceeds its share price return of 85%, implying it has either spun-off a business, or raised capital at a discount; thereby providing additional value to shareholders.
A Different Perspective
It's good to see that Novatti Group has rewarded shareholders with a total shareholder return of 80% in the last twelve months. Since the one-year TSR is better than the five-year TSR (the latter coming in at 14% per year), it would seem that the stock's performance has improved in recent times. In the best case scenario, this may hint at some real business momentum, implying that now could be a great time to delve deeper. It's always interesting to track share price performance over the longer term. But to understand Novatti Group better, we need to consider many other factors. Even so, be aware that Novatti Group is showing 6 warning signs in our investment analysis , and 3 of those don't sit too well with us...
We will like Novatti Group 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 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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