Yahoo Finance Investors in South32 (ASX:S32) have seen decent returns of 37% over the past five years
It hasn't been the best quarter for South32 Limited (ASX:S32) shareholders, since the share price has fallen 22% in that time. But the silver lining is the stock is up over five years. In that time, it is up 14%, which isn't bad, but is below the market return of 52%.
Now it's worth having a look at the company's fundamentals too, because that will help us determine if the long term shareholder return has matched the performance of the underlying business.
See our latest analysis for South32
Given that South32 didn't make a profit in the last twelve months, we'll focus on revenue growth to form a quick view of its business development. Shareholders of unprofitable companies usually desire strong revenue growth. That's because fast revenue growth can be easily extrapolated to forecast profits, often of considerable size.
For the last half decade, South32 can boast revenue growth at a rate of 4.3% per year. Put simply, that growth rate fails to impress. Like its revenue, its share price gained over the period. The increase of 3% per year probably reflects the modest revenue growth. It seems likely that we'll have to zoom in on the data, including profits, to understand if there is an opportunity here.
The image below shows how earnings and revenue have tracked over time (if you click on the image you can see greater detail).
South32 is well known by investors, and plenty of clever analysts have tried to predict the future profit levels. You can see what analysts are predicting for South32 in this interactive graph of future profit estimates.
What About Dividends?
As well as measuring the share price return, investors should also consider the total shareholder return (TSR). The TSR incorporates the value of any spin-offs or discounted capital raisings, along with any dividends, based on the assumption that the dividends are reinvested. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. In the case of South32, it has a TSR of 37% for the last 5 years. That exceeds its share price return that we previously mentioned. The dividends paid by the company have thusly boosted the total shareholder return.
A Different Perspective
Investors in South32 had a tough year, with a total loss of 7.2% (including dividends), against a market gain of about 14%. Even the share prices of good stocks drop sometimes, but we want to see improvements in the fundamental metrics of a business, before getting too interested. On the bright side, long term shareholders have made money, with a gain of 7% per year over half a decade. It could be that the recent sell-off is an opportunity, so it may be worth checking the fundamental data for signs of a long term growth trend. You might want to assess this data-rich visualization of its earnings, revenue and cash flow.
Of course South32 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 Australian 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.
