MC Mining Limited (ASX:MCM) shareholders might understandably be very concerned that the share price has dropped 35% in the last quarter. Despite this, the stock is a strong performer over the last year, no doubt about that. During that period, the share price soared a full 177%. So some might not be surprised to see the price retrace some. The real question is whether the business is trending in the right direction.
Since the stock has added AU$12m to its market cap in the past week alone, let's see if underlying performance has been driving long-term returns.
Given that MC Mining 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. When a company doesn't make profits, we'd generally expect to see good revenue growth. Some companies are willing to postpone profitability to grow revenue faster, but in that case one does expect good top-line growth.
Over the last twelve months, MC Mining's revenue grew by 14%. That's not a very high growth rate considering it doesn't make profits. So we wouldn't have expected the share price to rise by 177%. The business will need a lot more growth to justify that increase. It's quite likely that the market is considering other factors, not just revenue growth.
The company's revenue and earnings (over time) are depicted in the image below (click to see the exact numbers).
Take a more thorough look at MC Mining's financial health with this free report on its balance sheet.
What About The Total Shareholder Return (TSR)?
We've already covered MC Mining'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. MC Mining hasn't been paying dividends, but its TSR of 263% exceeds its share price return of 177%, 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 nice to see that MC Mining shareholders have received a total shareholder return of 263% over the last year. Notably the five-year annualised TSR loss of 9% per year compares very unfavourably with the recent share price performance. This makes us a little wary, but the business might have turned around its fortunes. 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. Consider for instance, the ever-present spectre of investment risk. We've identified 4 warning signs with MC Mining (at least 3 which are potentially serious) , and understanding them should be part of your investment process.
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 AU 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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