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As an investor its worth striving to ensure your overall portfolio beats the market average. But its virtually certain that sometimes you will buy stocks that fall short of the market average returns. Unfortunately, that's been the case for longer term Gowing Bros. Limited (ASX:GOW) shareholders, since the share price is down 27% in the last three years, falling well short of the market return of around 23%. In contrast, the stock price has popped 8.6% in the last thirty days.
So let's have a look and see if the longer term performance of the company has been in line with the underlying business' progress.
See our latest analysis for Gowing Bros
Gowing Bros wasn't profitable in the last twelve months, it is unlikely we'll see a strong correlation between its share price and its earnings per share (EPS). Arguably revenue is our next best option. Generally speaking, companies without profits are expected to grow revenue every year, and at a good clip. That's because it's hard to be confident a company will be sustainable if revenue growth is negligible, and it never makes a profit.
In the last three years Gowing Bros saw its revenue shrink by 5.0% per year. That is not a good result. The annual decline of 8% per year in that period has clearly disappointed holders. That makes sense given the lack of either profits or revenue growth. 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 how earnings and revenue have changed over time in the image below (click on the chart to see the exact values).
It's good to see that there was some significant insider buying in the last three months. That's a positive. On the other hand, we think the revenue and earnings trends are much more meaningful measures of the business. Dive deeper into the earnings by checking this interactive graph of Gowing Bros' earnings, revenue and cash flow.
What About Dividends?
As well as measuring the share price return, investors should also consider the total shareholder return (TSR). 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. We note that for Gowing Bros the TSR over the last 3 years was -21%, which is better than the share price return mentioned above. And there's no prize for guessing that the dividend payments largely explain the divergence!