Many investors define successful investing as beating the market average over the long term. But the risk of stock picking is that you will likely buy under-performing companies. We regret to report that long term YeboYethu (RF) Limited (JSE:YYLBEE) shareholders have had that experience, with the share price dropping 38% in three years, versus a market decline of about 14%. And over the last year the share price fell 30%, so we doubt many shareholders are delighted. The falls have accelerated recently, with the share price down 19% in the last three months.
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.
See our latest analysis for YeboYethu (RF)
YeboYethu (RF) 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 expect strong revenue growth. Some companies are willing to postpone profitability to grow revenue faster, but in that case one does expect good top-line growth.
In the last three years YeboYethu (RF) saw its revenue shrink by 4.9% per year. That's not what investors generally want to see. The stock has disappointed holders over the last three years, falling 11%, annualized. And with no profits, and weak revenue, are you surprised? However, in this kind of situation you can sometimes find opportunity, where sentiment is negative but the company is actually making good progress.
You can see below how earnings and revenue have changed over time (discover the exact values by clicking on the image).
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?
It is important to consider the total shareholder return, as well as the share price return, for any given stock. The TSR incorporates the value of any spin-offs or discounted capital raisings, along with any dividends, based on the assumption that the dividends are reinvested. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. We note that for YeboYethu (RF) the TSR over the last 3 years was -28%, which is better than the share price return mentioned above. This is largely a result of its dividend payments!
A Different Perspective
YeboYethu (RF) shareholders are down 25% for the year (even including dividends), but the market itself is up 4.2%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. On the bright side, long term shareholders have made money, with a gain of 11% per year over half a decade. It could be that the recent sell-off is an opportunity, so it may be worth checking the fundamental data for signs of a long term growth trend. It's always interesting to track share price performance over the longer term. But to understand YeboYethu (RF) better, we need to consider many other factors. Case in point: We've spotted 5 warning signs for YeboYethu (RF) you should be aware of, and 2 of them can't be ignored.