In This Article:
Select Harvests Limited (ASX:SHV) shareholders should be happy to see the share price up 15% in the last quarter. But if you look at the last five years the returns have not been good. You would have done a lot better buying an index fund, since the stock has dropped 30% in that half decade.
Since shareholders are down over the longer term, lets look at the underlying fundamentals over the that time and see if they've been consistent with returns.
Given that Select Harvests 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.
In the last half decade, Select Harvests saw its revenue increase by 0.3% per year. That's not a very high growth rate considering it doesn't make profits. Given the weak growth, the share price fall of 5% isn't particularly surprising. The key question is whether the company can make it to profitability, and beyond, without trouble. Shareholders will want the company to approach profitability if it can't grow revenue any faster.
The company's revenue and earnings (over time) are depicted in the image below (click to see the exact numbers).
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. So we recommend checking out this free report showing consensus forecasts
What About The Total Shareholder Return (TSR)?
We've already covered Select Harvests' share price action, but we should also mention its total shareholder return (TSR). Arguably the TSR is a more complete return calculation because it accounts for the value of dividends (as if they were reinvested), along with the hypothetical value of any discounted capital that have been offered to shareholders. Its history of dividend payouts mean that Select Harvests' TSR, which was a 25% drop over the last 5 years, was not as bad as the share price return.
A Different Perspective
We're pleased to report that Select Harvests shareholders have received a total shareholder return of 13% over one year. Notably the five-year annualised TSR loss of 5% per year compares very unfavourably with the recent share price performance. This makes us a little wary, but the business might have turned around its fortunes. I find it very interesting to look at share price over the long term as a proxy for business performance. But to truly gain insight, we need to consider other information, too. For example, we've discovered 2 warning signs for Select Harvests that you should be aware of before investing here.