The main aim of stock picking is to find the market-beating stocks. But the main game is to find enough winners to more than offset the losers So we wouldn't blame long term Webjet Limited (ASX:WEB) shareholders for doubting their decision to hold, with the stock down 55% over a half decade.
So let's have a look and see if the longer term performance of the company has been in line with the underlying business' progress.
Given that Webjet 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 expect strong revenue growth. Some companies are willing to postpone profitability to grow revenue faster, but in that case one does expect good top-line growth.
In the last five years Webjet saw its revenue shrink by 20% per year. That puts it in an unattractive cohort, to put it mildly. It seems appropriate, then, that the share price slid about 9% annually during that time. We don't generally like to own companies that lose money and don't grow revenues. You might be better off spending your money on a leisure activity. You'd want to research this company pretty thoroughly before buying, it looks a bit too risky for us.
You can see below how earnings and revenue have changed over time (discover the exact values by clicking on the image).
Webjet 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 Webjet in this interactive graph of future profit estimates.
What About The Total Shareholder Return (TSR)?
We'd be remiss not to mention the difference between Webjet's total shareholder return (TSR) and its share price return. 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 Webjet shareholders, and that cash payout explains why its total shareholder loss of 34%, over the last 5 years, isn't as bad as the share price return.
A Different Perspective
While the broader market lost about 4.8% in the twelve months, Webjet shareholders did even worse, losing 18%. Having said that, it's inevitable that some stocks will be oversold in a falling market. The key is to keep your eyes on the fundamental developments. Unfortunately, last year's performance may indicate unresolved challenges, given that it was worse than the annualised loss of 6% over the last half decade. We realise that Baron Rothschild has said investors should "buy when there is blood on the streets", but we caution that investors should first be sure they are buying a high quality business. Before spending more time on Webjet it might be wise to click here to see if insiders have been buying or selling shares.
Of course, you might find a fantastic investment by looking elsewhere. So take a peek at this free list of companies we expect will grow earnings.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on AU exchanges.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.
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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