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It is a pleasure to report that the Dawson Geophysical Company (NASDAQ:DWSN) is up 37% in the last quarter. But that doesn't help the fact that the three year return is less impressive. Truth be told the share price declined 26% in three years and that return, Dear Reader, falls short of what you could have got from passive investing with an index fund.
It's worthwhile assessing if the company's economics have been moving in lockstep with these underwhelming shareholder returns, or if there is some disparity between the two. So let's do just that.
Check out our latest analysis for Dawson Geophysical
Dawson Geophysical isn't currently profitable, so most analysts would look to revenue growth to get an idea of how fast the underlying business is growing. Shareholders of unprofitable companies usually desire strong revenue growth. That's because it's hard to be confident a company will be sustainable if revenue growth is negligible, and it never makes a profit.
In the last three years, Dawson Geophysical saw its revenue grow by 42% per year, compound. That's well above most other pre-profit companies. While its revenue increased, the share price dropped at a rate of 8% per year. That seems like an unlucky result for holders. It's possible that the prior share price assumed unrealistically high future growth. Still, with high hopes now tempered, now might prove to be an opportunity to buy.
The image below shows how earnings and revenue have tracked over time (if you click on the image you can see greater detail).
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 Dawson Geophysical'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. Dawson Geophysical's TSR of was a loss of 13% for the 3 years. That wasn't as bad as its share price return, because it has paid dividends.
A Different Perspective
Dawson Geophysical shareholders are up 12% for the year. Unfortunately this falls short of the market return. On the bright side, that's still a gain, and it is certainly better than the yearly loss of about 0.6% endured over half a decade. It could well be that the business is stabilizing. 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. For example, we've discovered 3 warning signs for Dawson Geophysical that you should be aware of before investing here.