Investing in Salcon Berhad (KLSE:SALCON) three years ago would have delivered you a 61% gain
By buying an index fund, you can roughly match the market return with ease. But if you choose individual stocks with prowess, you can make superior returns. For example, Salcon Berhad (KLSE:SALCON) shareholders have seen the share price rise 61% over three years, well in excess of the market return (14%, not including dividends). However, more recent returns haven’t been as impressive as that, with the stock returning just 7.1% in the last year.
Let’s take a look at the underlying fundamentals over the longer term, and see if they’ve been consistent with shareholders returns.
See our latest analysis for Salcon Berhad
Salcon Berhad isn’t currently profitable, so most analysts would look to revenue growth to get an idea of how fast the underlying business is growing. Generally speaking, companies without profits are expected to grow revenue every year, and at a good clip. As you can imagine, fast revenue growth, when maintained, often leads to fast profit growth.
In the last 3 years Salcon Berhad saw its revenue shrink by 3.1% per year. Despite the lack of revenue growth, the stock has returned 17%, compound, over three years. Unless the company is going to make profits soon, we would be pretty cautious about it.
The image below shows how earnings and revenue have tracked over time (if you click on the image you can see greater detail).
You can see how its balance sheet has strengthened (or weakened) over time in this free interactive graphic.
A Different Perspective
It’s nice to see that Salcon Berhad shareholders have received a total shareholder return of 7.1% over the last year. There’s no doubt those recent returns are much better than the TSR loss of 5% per year over five years. This makes us a little wary, but the business might have turned around its fortunes. It’s always interesting to track share price performance over the longer term. But to understand Salcon Berhad better, we need to consider many other factors. For example, we’ve discovered 1 warning sign for Salcon Berhad that you should be aware of before investing here.
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 Malaysian 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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