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In order to justify the effort of selecting individual stocks, it's worth striving to beat the returns from a market index fund. But if you try your hand at stock picking, you risk returning less than the market. Unfortunately, that's been the case for longer term StorageVault Canada Inc. (TSE:SVI) shareholders, since the share price is down 43% in the last three years, falling well short of the market return of around 18%. And the ride hasn't got any smoother in recent times over the last year, with the price 23% lower in that time.
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.
StorageVault Canada isn't currently profitable, so most analysts would look to revenue growth to get an idea of how fast the underlying business is growing. When a company doesn't make profits, we'd generally hope to see good revenue growth. That's because fast revenue growth can be easily extrapolated to forecast profits, often of considerable size.
In the last three years, StorageVault Canada saw its revenue grow by 11% per year, compound. That's a fairly respectable growth rate. Shareholders have endured a share price decline of 13% per year. So the market has definitely lost some love for the stock. With revenue growing at a solid clip, now might be the time to focus on the possibility that it will have a brighter future.
The company's revenue and earnings (over time) are depicted in the image below (click to see the exact numbers).
We consider it positive that insiders have made significant purchases in the last year. Having said that, most people consider earnings and revenue growth trends to be a more meaningful guide to the business. So we recommend checking out this free report showing consensus forecasts
A Different Perspective
Investors in StorageVault Canada had a tough year, with a total loss of 23% (including dividends), against a market gain of about 12%. Even the share prices of good stocks drop sometimes, but we want to see improvements in the fundamental metrics of a business, before getting too interested. Longer term investors wouldn't be so upset, since they would have made 7%, each year, over five years. 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. If you want to research this stock further, the data on insider buying is an obvious place to start. You can click here to see who has been buying shares - and the price they paid.