In This Article:
We think intelligent long term investing is the way to go. But along the way some stocks are going to perform badly. To wit, the RF Capital Group Inc. (TSE:RCG) share price managed to fall 71% over five long years. That is extremely sub-optimal, to say the least.
It's worthwhile assessing if the company's economics have been moving in lockstep with these underwhelming shareholder returns, or if there is some disparity between the two. So let's do just that.
See our latest analysis for RF Capital Group
Because RF Capital Group made a loss in the last twelve months, we think the market is probably more focussed on revenue and revenue growth, at least for now. When a company doesn't make profits, we'd generally hope to see good revenue growth. As you can imagine, fast revenue growth, when maintained, often leads to fast profit growth.
Over five years, RF Capital Group grew its revenue at 38% per year. That's well above most other pre-profit companies. So it's not at all clear to us why the share price sunk 11% throughout that time. You'd have to assume the market is worried that profits won't come soon enough. We'd recommend carefully checking for indications of future growth - and balance sheet threats - before considering a purchase.
You can see how earnings and revenue have changed over time in the image below (click on the chart to see the exact values).
If you are thinking of buying or selling RF Capital Group stock, you should check out this FREE detailed report on its balance sheet.
What About The Total Shareholder Return (TSR)?
We've already covered RF Capital Group's share price action, but we should also mention its total shareholder return (TSR). 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 and spin-offs. Dividends have been really beneficial for RF Capital Group shareholders, and that cash payout explains why its total shareholder loss of 65%, over the last 5 years, isn't as bad as the share price return.
A Different Perspective
While the broader market gained around 13% in the last year, RF Capital Group shareholders lost 9.4%. Even the share prices of good stocks drop sometimes, but we want to see improvements in the fundamental metrics of a business, before getting too interested. However, the loss over the last year isn't as bad as the 11% per annum loss investors have suffered over the last half decade. We would want clear information suggesting the company will grow, before taking the view that the share price will stabilize. 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. Case in point: We've spotted 2 warning signs for RF Capital Group you should be aware of, and 1 of them can't be ignored.