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While it may not be enough for some shareholders, we think it is good to see the Canfor Corporation (TSE:CFP) share price up 21% in a single quarter. But that cannot eclipse the less-than-impressive returns over the last three years. Truth be told the share price declined 41% in three years and that return, Dear Reader, falls short of what you could have got from passive investing with an index fund.
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.
Check out our latest analysis for Canfor
Given that Canfor 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. When a company doesn't make profits, we'd generally hope to see good revenue growth. Some companies are willing to postpone profitability to grow revenue faster, but in that case one would hope for good top-line growth to make up for the lack of earnings.
Over the last three years, Canfor's revenue dropped 16% per year. That's definitely a weaker result than most pre-profit companies report. With revenue in decline, the share price decline of 12% per year is hardly undeserved. The key question now is whether the company has the capacity to fund itself to profitability, without more cash. Of course, it is possible for businesses to bounce back from a revenue drop - but we'd want to see that before getting interested.
You can see below how earnings and revenue have changed over time (discover the exact values by clicking on the image).
Take a more thorough look at Canfor's financial health with this free report on its balance sheet.
A Different Perspective
Canfor shareholders gained a total return of 5.6% during the year. But that was short of the market average. The silver lining is that the gain was actually better than the average annual return of 2% per year over five year. This suggests the company might be improving over time. You might want to assess this data-rich visualization of its earnings, revenue and cash flow.
We will like Canfor better if we see some big insider buys. While we wait, check out this free list of undervalued stocks (mostly small caps) with considerable, recent, insider buying.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on Canadian exchanges.
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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.