When you buy and hold a stock for the long term, you definitely want it to provide a positive return. Furthermore, you'd generally like to see the share price rise faster than the market But Andersen & Martini Holding A/S (CPH:AM B) has fallen short of that second goal, with a share price rise of 35% over five years, which is below the market return. However, if you include the dividends then the return is market beating. Unfortunately the share price is down 32% in the last year.
See our latest analysis for Andersen & Martini Holding
We don't think that Andersen & Martini Holding's modest trailing twelve month profit has the market's full attention at the moment. We think revenue is probably a better guide. As a general rule, we think this kind of company is more comparable to loss-making stocks, since the actual profit is so low. For shareholders to have confidence a company will grow profits significantly, it must grow revenue.
For the last half decade, Andersen & Martini Holding can boast revenue growth at a rate of 4.0% per year. Put simply, that growth rate fails to impress. It's probably fair to say that the modest growth is reflected in the modest share price gain of 6.2% per year. It seems likely that we'll have to zoom in on the data, including profits, to understand if there is an opportunity here.
You can see how earnings and revenue have changed over time in the image below (click on the chart to see the exact values).
Balance sheet strength is crucial. It might be well worthwhile taking a look at our free report on how its financial position has changed over time.
What about the Total Shareholder Return (TSR)?
We've already covered Andersen & Martini Holding'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. We note that Andersen & Martini Holding's TSR, at 79% is higher than its share price return of 35%. When you consider it hasn't been paying a dividend, this data suggests shareholders have benefitted from a spin-off, or had the opportunity to acquire attractively priced shares in a discounted capital raising.
A Different Perspective
While the broader market gained around 24% in the last year, Andersen & Martini Holding shareholders lost 32%. 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 12% 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. Before forming an opinion on Andersen & Martini Holding you might want to consider these 3 valuation metrics.