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While it may not be enough for some shareholders, we think it is good to see the CVC Limited (ASX:CVC) share price up 18% in a single quarter. But that cannot eclipse the less-than-impressive returns over the last three years. Truth be told the share price declined 24% in three years and that return, Dear Reader, falls short of what you could have got from passive investing with an index fund.
Now let's have a look at the company's fundamentals, and see if the long term shareholder return has matched the performance of the underlying business.
View our latest analysis for CVC
Given that CVC 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. Generally speaking, companies without profits are expected to grow revenue every year, and at a good clip. As you can imagine, fast revenue growth, when maintained, often leads to fast profit growth.
Over the last three years, CVC's revenue dropped 17% per year. That's definitely a weaker result than most pre-profit companies report. With revenue in decline, the share price decline of 7% per year is hardly undeserved. The key question now is whether the company has the capacity to fund itself to profitability, without more cash. The company will need to return to revenue growth as quickly as possible, if it wants to see some enthusiasm from investors.
The company's revenue and earnings (over time) are depicted in the image below (click to see the exact numbers).
Take a more thorough look at CVC's financial health with this free report on its balance sheet.
What About The Total Shareholder Return (TSR)?
We'd be remiss not to mention the difference between CVC's total shareholder return (TSR) and its share price return. Arguably the TSR is a more complete return calculation because it accounts for the value of dividends (as if they were reinvested), along with the hypothetical value of any discounted capital that have been offered to shareholders. CVC's TSR of was a loss of 18% for the 3 years. That wasn't as bad as its share price return, because it has paid dividends.
A Different Perspective
Investors in CVC had a tough year, with a total loss of 20%, against a market gain of about 21%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. Unfortunately, last year's performance may indicate unresolved challenges, given that it was worse than the annualised loss of 0.7% over the last half decade. We realise that Baron Rothschild 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 business. It's always interesting to track share price performance over the longer term. But to understand CVC better, we need to consider many other factors. For instance, we've identified 2 warning signs for CVC that you should be aware of.