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When you buy and hold a stock for the long term, you definitely want it to provide a positive return. Furthermore, you'd generally like to see the share price rise faster than the market. But V2X, Inc. (NYSE:VVX) has fallen short of that second goal, with a share price rise of 37% over five years, which is below the market return. Some buyers are laughing, though, with an increase of 23% in the last year.
Let's take a look at the underlying fundamentals over the longer term, and see if they've been consistent with shareholders returns.
View our latest analysis for V2X
Because V2X made a loss in the last twelve months, we think the market is probably more focussed on revenue and revenue growth, at least for now. Shareholders of unprofitable companies usually desire strong revenue growth. As you can imagine, fast revenue growth, when maintained, often leads to fast profit growth.
In the last 5 years V2X saw its revenue grow at 28% per year. Even measured against other revenue-focussed companies, that's a good result. While long-term shareholders have made money, the 6% per year gain over five years fall short of the market return. You could argue the market is still pretty skeptical, given the growing revenues. Arguably this falls in a potential sweet spot - modest share price gains but good top line growth over the long term justifies investigation, in our book.
The image below shows how earnings and revenue have tracked over time (if you click on the image you can see greater detail).
It's probably worth noting we've seen significant insider buying in the last quarter, which we consider a positive. On the other hand, we think the revenue and earnings trends are much more meaningful measures of the business. If you are thinking of buying or selling V2X stock, you should check out this free report showing analyst profit forecasts.
A Different Perspective
V2X shareholders gained a total return of 23% 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 6% per year over five year. This could indicate that the company is winning over new investors, as it pursues its strategy. While it is well worth considering the different impacts that market conditions can have on the share price, there are other factors that are even more important. Take risks, for example - V2X has 2 warning signs (and 1 which doesn't sit too well with us) we think you should know about.
If you like to buy stocks alongside management, then you might just love this free list of companies. (Hint: most of them are flying under the radar).