The worst result, after buying shares in a company (assuming no leverage), would be if you lose all the money you put in. But if you buy shares in a really great company, you can more than double your money. To wit, the Netcall plc (LON:NET) share price has flown 158% in the last three years. How nice for those who held the stock! On top of that, the share price is up 31% in about a quarter.
So let's investigate and see if the longer term performance of the company has been in line with the underlying business' progress.
View our latest analysis for Netcall
While Netcall made a small profit, in the last year, we think that the market is probably more focussed on the top line growth at the moment. Generally speaking, we'd consider a stock like this alongside loss-making companies, simply because the quantum of the profit is so low. For shareholders to have confidence a company will grow profits significantly, it must grow revenue.
In the last 3 years Netcall saw its revenue grow at 8.2% per year. That's pretty nice growth. It's fair to say that the market has acknowledged the growth by pushing the share price up 37% per year. It's hard to value pre-profit businesses, but it seems like the market has become a lot more optimistic about this one! Some investors like to buy in just after a company becomes profitable, since that can be a powerful inflexion point.
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 is of course excellent to see how Netcall has grown profits over the years, but the future is more important for shareholders. This free interactive report on Netcall's balance sheet strength is a great place to start, if you want to investigate the stock further.
What About Dividends?
As well as measuring the share price return, investors should also consider the total shareholder return (TSR). The TSR incorporates the value of any spin-offs or discounted capital raisings, along with any dividends, based on the assumption that the dividends are reinvested. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. As it happens, Netcall's TSR for the last 3 years was 162%, which exceeds the share price return mentioned earlier. And there's no prize for guessing that the dividend payments largely explain the divergence!
A Different Perspective
It's good to see that Netcall has rewarded shareholders with a total shareholder return of 6.3% in the last twelve months. Of course, that includes the dividend. However, the TSR over five years, coming in at 9% per year, is even more impressive. 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. Consider for instance, the ever-present spectre of investment risk. We've identified 4 warning signs with Netcall (at least 1 which is concerning) , and understanding them should be part of your investment process.
For those who like to find winning investments this free list of growing companies with recent insider purchasing, could be just the ticket.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on GB exchanges.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.
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.
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