CSG Limited (ASX:CSV) shareholders will doubtless be very grateful to see the share price up 45% in the last month. But that doesn’t change the fact that the returns over the last three years have been stomach churning. Indeed, the share price is down a whopping 83% in the last three years. So we’re relieved for long term holders to see a bit of uplift. Only time will tell if the company can sustain the turnaround.
We really feel for shareholders in this scenario. It’s a good reminder of the importance of diversification, and it’s worth keeping in mind there’s more to life than money, anyway.
View our latest analysis for CSG
Because CSG is loss-making, we think the market is probably more focussed on revenue and revenue growth, at least for now. Generally speaking, companies without profits are expected to grow revenue every year, and at a good clip. That’s because it’s hard to be confident a company will be sustainable if revenue growth is negligible, and it never makes a profit.
Over the last three years, CSG’s revenue dropped 3.1% per year. That is not a good result. Having said that the 45% annualized share price decline highlights the risk of investing in unprofitable companies. We’re generally averse to companies with declining revenues, but we’re not alone in that. Don’t let a share price decline ruin your calm. You make better decisions when you’re calm.
The graphic below shows how revenue and earnings have changed as management guided the business forward. If you want to see cashflow, you can click on the chart.
It’s probably worth noting that the CEO is paid less than the median at similar sized companies. It’s always worth keeping an eye on CEO pay, but a more important question is whether the company will grow earnings throughout the years. You can see what analysts are predicting for CSG in this interactive graph of future profit estimates.
What about the Total Shareholder Return (TSR)?
We’d be remiss not to mention the difference between CSG’s total shareholder return (TSR) and its share price return. The TSR is a return calculation that accounts for the value of cash dividends (assuming that any dividend received was reinvested) and the calculated value of any discounted capital raisings. Dividends have been really beneficial for CSG shareholders, and that cash payout explains why its total shareholder loss of 82%, over the last 3 years, isn’t as bad as the share price return.
A Different Perspective
Investors in CSG had a tough year, with a total loss of 27%, against a market gain of about 9.1%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. Regrettably, last year’s performance caps off a bad run, with the shareholders facing a total loss of 22% per year over five years. We realise that Buffett has said investors should ‘buy when there is blood on the streets’, but we caution that investors should first be sure they are buying a high quality businesses. If you would like to research CSG in more detail then you might want to take a look at whether insiders have been buying or selling shares in the company.