For many people, the primary objective of investing is to generate returns higher than the overall market. However, every investor will almost certainly have both overperforming and underperforming stocks. Transurban Group (ASX:TCL) shareholders are questioning their decision to hold, with the share price falling 15% in five years.
The recent 3.7% increase could be a positive sign for the future, so let’s take a look at historical fundamentals.
Check out our latest analysis for Transurban Group
Transurban Group made a small profit last year, but the market is probably more focused on revenue growth at this point. Generally, we would consider these types of companies to be comparable to loss-making stocks because their actual profits are so low. Without revenue growth, it’s hard to believe in a more profitable future.
Over the past five years, Transurban Group’s revenue has grown 1.7% per year. That’s not great when you consider the losses. A 3% drop in the share price isn’t particularly surprising given the weak growth. Investors need to consider how large the losses are and whether the company can easily return to profitability. If the company can’t grow revenue any faster, shareholders will want to see it get closer to profitability.
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 insiders have been buying shares in the last twelve months. Still, future earnings are much more important than whether current shareholders make money. If you’re thinking about buying or selling Transurban Group shares, check this out. free A report showing analyst profit forecasts.
What about dividends?
When looking at investment returns, it’s important to consider the following differences: Total shareholder return (TSR) and Stock returnThe TSR incorporates the value of any spin-offs or discounted capital raisings, as well as dividends, based on the assumption that the dividends are reinvested. It can be said that the TSR gives a more comprehensive picture of the return generated by a stock. In the case of Transurban Group, the TSR for the last 5 years was 2.2%, which exceeds the share price return mentioned above. And it’s not hard to guess that dividend payments mainly explain this deviation.
A different perspective
It’s been a tough year for Transurban Group investors, with a total loss of 4.3% (including dividends) while the market rose about 14%. But remember that even the best stocks can underperform the market over a 12-month period. Longer-term investors won’t be as upset, as they’ll earn 0.4% annually over five years. If the fundamental data continues to point to sustainable growth over the long term, the current sell-off could be an opportunity worth considering. I find it very interesting to look at share price over the long term as a proxy for business performance. But to gain real insight, other information needs to be considered, too. For example, risk taking. Transurban Group is Two warning signs I think you should know.
Transurban Group isn’t the only stock insiders are buying. Lesser known companies this free This free list of growing companies with recent insider purchasing, could be just what you’re looking for.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on Australian exchanges.
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This article by Simply Wall St is general in nature. We use only unbiased methodologies to provide commentary based on historical data and analyst forecasts, and our articles are not intended as financial advice. It is not a recommendation to buy or sell stocks, and does not take into account your objectives, or your financial situation. We seek to provide long-term focused analysis driven by fundamental data. Note that our analysis may not take into account the latest price sensitive company announcements or qualitative material. Simply Wall St has no position in any of the stocks mentioned.
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