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Investing in stocks inevitably means buying into some companies that perform poorly. But the long term shareholders of Alta Equipment Group Inc. (NYSE:ALTG) have had an unfortunate run in the last three years. So they might be feeling emotional about the 55% share price collapse, in that time. And over the last year the share price fell 47%, so we doubt many shareholders are delighted. Unfortunately the share price momentum is still quite negative, with prices down 16% in thirty days.
With that in mind, it's worth seeing if the company's underlying fundamentals have been the driver of long term performance, or if there are some discrepancies.
View our latest analysis for Alta Equipment Group
Given that Alta Equipment Group didn't make a profit in the last twelve months, we'll focus on revenue growth to form a quick view of its business development. Generally speaking, companies without profits are expected to grow revenue every year, and at a good clip. That's because fast revenue growth can be easily extrapolated to forecast profits, often of considerable size.
Over three years, Alta Equipment Group grew revenue at 18% per year. That's a pretty good rate of top-line growth. So some shareholders would be frustrated with the compound loss of 16% per year. To be frank we're surprised to see revenue growth and share price growth diverge so strongly. It would be well worth taking a closer look at the company, to determine growth trends (and balance sheet strength).
The company's revenue and earnings (over time) are depicted in the image below (click to see the exact numbers).
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 Dividends?
When looking at investment returns, it is important to consider the difference between total shareholder return (TSR) and 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. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. As it happens, Alta Equipment Group's TSR for the last 3 years was -52%, which exceeds the share price return mentioned earlier. This is largely a result of its dividend payments!
A Different Perspective
Investors in Alta Equipment Group had a tough year, with a total loss of 45% (including dividends), against a market gain of about 25%. Even the share prices of good stocks drop sometimes, but we want to see improvements in the fundamental metrics of a business, before getting too interested. Unfortunately, last year's performance may indicate unresolved challenges, given that it was worse than the annualised loss of 5% over the last half decade. Generally speaking long term share price weakness can be a bad sign, though contrarian investors might want to research the stock in hope of a turnaround. While it is well worth considering the different impacts that market conditions can have on the share price, there are other factors that are even more important. Even so, be aware that Alta Equipment Group is showing 3 warning signs in our investment analysis , you should know about...