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The simplest way to benefit from a rising market is to buy an index fund. While individual stocks can be big winners, plenty more fail to generate satisfactory returns. That downside risk was realized by Metrovacesa S.A. (BME:MVC) shareholders over the last year, as the share price declined 25%. That's disappointing when you consider the market returned -0.7%. We wouldn't rush to judgement on Metrovacesa because we don't have a long term history to look at. Shareholders have had an even rougher run lately, with the share price down 15% in the last 90 days.
See our latest analysis for Metrovacesa
Given that Metrovacesa only made minimal earnings in the last twelve months, we'll focus on revenue to gauge its business development. As a general rule, we think this kind of company is more comparable to loss-making stocks, since the actual profit is so low. It would be hard to believe in a more profitable future without growing revenues.
Metrovacesa grew its revenue by 213% over the last year. That's a strong result which is better than most other loss making companies. The share price drop of 25% over twelve months would be considered disappointing by many, so you might argue the company is getting little credit for its impressive revenue growth. Prima facie, revenue growth like that should be a good thing, so it's worth checking whether losses have stabilized. Our brains have evolved to think in linear fashion, so there's value in learning to recognize exponential growth. We are, in some ways, simply the wisest of the monkeys.
The graphic below depicts how earnings and revenue have changed over time (unveil the exact values by clicking on the image).
We like that insiders have been buying shares in the last twelve months. Even so, future earnings will be far more important to whether current shareholders make money. If you are thinking of buying or selling Metrovacesa stock, you should check out this free report showing analyst profit forecasts.
What About Dividends?
It is important to consider the total shareholder return, as well as the share price return, for any given stock. 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, Metrovacesa's TSR for the last year was -23%, which exceeds the share price return mentioned earlier. This is largely a result of its dividend payments!