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Passive investing in index funds can generate returns that roughly match the overall market. But you can significantly boost your returns by picking above-average stocks. To wit, the SBF AG (FRA:CY1K) share price is 69% higher than it was a year ago, much better than the market return of around 13% (not including dividends) in the same period. So that should have shareholders smiling. Unfortunately the longer term returns are not so good, with the stock falling 36% in the last three years.
After a strong gain in the past week, it's worth seeing if longer term returns have been driven by improving fundamentals.
SBF wasn't profitable in the last twelve months, it is unlikely we'll see a strong correlation between its share price and its earnings per share (EPS). Arguably revenue is our next best option. When a company doesn't make profits, we'd generally hope to see good revenue growth. Some companies are willing to postpone profitability to grow revenue faster, but in that case one would hope for good top-line growth to make up for the lack of earnings.
Over the last twelve months, SBF's revenue grew by 44%. We respect that sort of growth, no doubt. While the share price performed well, gaining 69% over twelve months, you could argue the revenue growth warranted it. If revenue stays on trend, there may be plenty more share price gains to come. But it's crucial to check profitability and cash flow before forming a view on the future.
You can see below how earnings and revenue have changed over time (discover the exact values by clicking on the image).
This free interactive report on SBF's balance sheet strength is a great place to start, if you want to investigate the stock further.
A Different Perspective
We're pleased to report that SBF shareholders have received a total shareholder return of 69% over one year. That certainly beats the loss of about 1.3% per year over the last half decade. The long term loss makes us cautious, but the short term TSR gain certainly hints at a brighter future. I find it very interesting to look at share price over the long term as a proxy for business performance. But to truly gain insight, we need to consider other information, too. For example, we've discovered 2 warning signs for SBF (1 is a bit unpleasant!) that you should be aware of before investing here.
For those who like to find winning investments this free list of undervalued companies with recent insider purchasing, could be just the ticket.