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Many investors define successful investing as beating the market average over the long term. But the risk of stock picking is that you will likely buy under-performing companies. Unfortunately, that's been the case for longer term BNK Banking Corporation Limited (ASX:BBC) shareholders, since the share price is down 57% in the last three years, falling well short of the market return of around 20%. Shareholders have had an even rougher run lately, with the share price down 16% in the last 90 days.
Since shareholders are down over the longer term, lets look at the underlying fundamentals over the that time and see if they've been consistent with returns.
View our latest analysis for BNK Banking
Because BNK Banking made a loss in the last twelve months, we think the market is probably more focussed on revenue and revenue growth, at least for now. 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.
In the last three years BNK Banking saw its revenue shrink by 3.6% per year. That's not what investors generally want to see. The share price decline of 16% compound, over three years, is understandable given the company doesn't have profits to boast of, and revenue is moving in the wrong direction. Of course, it's the future that will determine whether today's price is a good one. We'd be pretty wary of this one until it makes a profit, because we don't specialize in finding turnaround situations.
You can see below how earnings and revenue have changed over time (discover the exact values by clicking on the image).
If you are thinking of buying or selling BNK Banking stock, you should check out this FREE detailed report on its balance sheet.
What About The Total Shareholder Return (TSR)?
We'd be remiss not to mention the difference between BNK Banking's total shareholder return (TSR) and its share price return. 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. BNK Banking hasn't been paying dividends, but its TSR of -16% exceeds its share price return of -57%, implying it has either spun-off a business, or raised capital at a discount; thereby providing additional value to shareholders.
A Different Perspective
Investors in BNK Banking had a tough year, with a total loss of 8.6%, against a market gain of about 14%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. On the bright side, long term shareholders have made money, with a gain of 1.4% per year over half a decade. If the fundamental data continues to indicate long term sustainable growth, the current sell-off could be an opportunity worth considering. I find it very interesting to look at share price over the long term as a proxy for business performance. But to truly gain insight, we need to consider other information, too. Even so, be aware that BNK Banking is showing 2 warning signs in our investment analysis , and 1 of those is a bit concerning...