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Generally speaking the aim of active stock picking is to find companies that provide returns that are superior to the market average. And in our experience, buying the right stocks can give your wealth a significant boost. For example, long term Softline AG (ETR:SFD1) shareholders have enjoyed a 71% share price rise over the last half decade, well in excess of the market return of around 6.8% (not including dividends).
Check out our latest analysis for Softline
While Softline 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.
For the last half decade, Softline can boast revenue growth at a rate of 1.6% per year. Put simply, that growth rate fails to impress. The modest growth is probably broadly reflected in the share price, which is up 11%, per year over 5 years. The business could be one worth watching but we generally prefer faster revenue growth.
The chart below shows how revenue and earnings have changed with time, (if you click on the chart you can see the actual values).
Take a more thorough look at Softline's financial health with this free report on its balance sheet.
A Different Perspective
While it's never nice to take a loss, Softline shareholders can take comfort that their trailing twelve month loss of 5.5% wasn't as bad as the market loss of around 8.0%. Of course, the long term returns are far more important and the good news is that over five years, the stock has returned 11% for each year. It could be that the business is just facing some short term problems, but shareholders should keep a close eye on the fundamentals. Before deciding if you like the current share price, check how Softline scores on these 3 valuation metrics.
Of course, you might find a fantastic investment by looking elsewhere. So take a peek at this free list of companies we expect will grow earnings.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on DE exchanges.
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.
If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned. Thank you for reading.