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TECSYS Inc. (TSE:TCS) shareholders have seen the share price descend 10% over the month. But in stark contrast, the returns over the last half decade have impressed. Indeed, the share price is up an impressive 110% in that time. To some, the recent pullback wouldn't be surprising after such a fast rise. Only time will tell if there is still too much optimism currently reflected in the share price.
View our latest analysis for TECSYS
We don't think that TECSYS'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.
In the last 5 years TECSYS saw its revenue grow at 8.6% per year. That's a fairly respectable growth rate. Broadly speaking, this solid progress may well be reflected by the healthy share price gain of 16% per year over five years. Given that the business has made good progress on the top line, it would be worth taking a look at the growth trend. When a growth trend accelerates, be it in revenue or earnings, it can indicate an inflection point for the business, which is can often be an opportunity for investors.
The graphic below shows how revenue and earnings have changed as management guided the business forward. If you want to see cashflow, you can click on the chart.
Balance sheet strength is crucual. It might be well worthwhile taking a look at our free report on how its financial position has changed over time.
What About Dividends?
When looking at investment returns, it is important to consider the difference between total shareholder return (TSR) and share price return. Whereas the share price return only reflects the change in the share price, the TSR includes the value of dividends (assuming they were reinvested) and the benefit of any discounted capital raising or spin-off. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. As it happens, TECSYS's TSR for the last 5 years was 124%, which exceeds the share price return mentioned earlier. This is largely a result of its dividend payments!
A Different Perspective
We regret to report that TECSYS shareholders are down 5.9% for the year (even including dividends). Unfortunately, that's worse than the broader market decline of 0.8%. Having said that, it's inevitable that some stocks will be oversold in a falling market. The key is to keep your eyes on the fundamental developments. On the bright side, long term shareholders have made money, with a gain of 18% 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. Before spending more time on TECSYS it might be wise to click here to see if insiders have been buying or selling shares.