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As an investor its worth striving to ensure your overall portfolio beats the market average. But if you try your hand at stock picking, your risk returning less than the market. We regret to report that long term CAA Resources Limited (HKG:2112) shareholders have had that experience, with the share price dropping 35% in three years, versus a market return of about 40%. Unhappily, the share price slid 2.5% in the last week.
See our latest analysis for CAA Resources
While CAA Resources made a small profit, in the last year, we think that the market is probably more focussed on the top line growth at the moment. 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.
Over three years, CAA Resources grew revenue at 17% per year. That's a pretty good rate of top-line growth. Shareholders have endured a share price decline of 13% per year. This implies the market had higher expectations of CAA Resources. With revenue growing at a solid clip, now might be the time to focus on the possibility that it will have a brighter future.
Depicted in the graphic below, you'll see revenue and earnings over time. If you want more detail, you can click on the chart itself.
This free interactive report on CAA Resources's balance sheet strength is a great place to start, if you want to investigate the stock further.
What about the Total Shareholder Return (TSR)?
We'd be remiss not to mention the difference between CAA Resources's total shareholder return (TSR) and its share price return. The TSR is a return calculation that accounts for the value of cash dividends (assuming that any dividend received was reinvested) and the calculated value of any discounted capital raisings and spin-offs. CAA Resources's TSR of was a loss of 35% for the 3 years. That wasn't as bad as its share price return, because it has paid dividends.
A Different Perspective
We regret to report that CAA Resources shareholders are down 13% for the year. Unfortunately, that's worse than the broader market decline of 0.5%. However, it could simply be that the share price has been impacted by broader market jitters. It might be worth keeping an eye on the fundamentals, in case there's a good opportunity. On the bright side, long term shareholders have made money, with a gain of 0.7% 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. Shareholders might want to examine this detailed historical graph of past earnings, revenue and cash flow.