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It's been a soft week for Bowen Coking Coal Limited (ASX:BCB) shares, which are down 12%. Looking further back, the stock has generated good profits over five years. It has returned a market beating 88% in that time. Unfortunately not all shareholders will have held it for the long term, so spare a thought for those caught in the 65% decline over the last twelve months.
In light of the stock dropping 12% in the past week, we want to investigate the longer term story, and see if fundamentals have been the driver of the company's positive five-year return.
Check out our latest analysis for Bowen Coking Coal
Given that Bowen Coking Coal 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. That's because fast revenue growth can be easily extrapolated to forecast profits, often of considerable size.
For the last half decade, Bowen Coking Coal can boast revenue growth at a rate of 95% per year. That's well above most pre-profit companies. It's good to see that the stock has 13%, but not entirely surprising given revenue shows strong growth. If the strong revenue growth continues, we'd hope to see the share price to follow, in time. Opportunity lies where the market hasn't fully priced growth in the underlying business.
The image below shows how earnings and revenue have tracked over time (if you click on the image you can see greater detail).
We consider it positive that insiders have made significant purchases in the last year. Even so, future earnings will be far more important to whether current shareholders make money. This free report showing analyst forecasts should help you form a view on Bowen Coking Coal
What About The Total Shareholder Return (TSR)?
Investors should note that there's a difference between Bowen Coking Coal's total shareholder return (TSR) and its share price change, which we've covered above. The TSR attempts to capture the value of dividends (as if they were reinvested) as well as any spin-offs or discounted capital raisings offered to shareholders. Bowen Coking Coal hasn't been paying dividends, but its TSR of 97% exceeds its share price return of 88%, implying it has either spun-off a business, or raised capital at a discount; thereby providing additional value to shareholders.
A Different Perspective
Investors in Bowen Coking Coal had a tough year, with a total loss of 64%, against a market gain of about 13%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. On the bright side, long term shareholders have made money, with a gain of 15% per year over half a decade. 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. It's always interesting to track share price performance over the longer term. But to understand Bowen Coking Coal better, we need to consider many other factors. Consider for instance, the ever-present spectre of investment risk. We've identified 3 warning signs with Bowen Coking Coal (at least 1 which is concerning) , and understanding them should be part of your investment process.