Canada Markets open in 6 hrs 5 mins

Despite the downward trend in earnings at Rectifier Technologies (ASX:RFT) the stock rallies 98%, bringing five-year gains to 324%

  • Oops!
    Something went wrong.
    Please try again later.
·3 min read
In this article:
  • Oops!
    Something went wrong.
    Please try again later.

For many, the main point of investing in the stock market is to achieve spectacular returns. And we've seen some truly amazing gains over the years. For example, the Rectifier Technologies Limited (ASX:RFT) share price is up a whopping 314% in the last half decade, a handsome return for long term holders. If that doesn't get you thinking about long term investing, we don't know what will. It's even up 98% in the last week.

After a strong gain in the past week, it's worth seeing if longer term returns have been driven by improving fundamentals.

Check out our latest analysis for Rectifier Technologies

Given that Rectifier Technologies only made minimal earnings in the last twelve months, we'll focus on revenue to gauge its business development. As a general rule, we think this kind of company is more comparable to loss-making stocks, since the actual profit is so low. For shareholders to have confidence a company will grow profits significantly, it must grow revenue.

In the last 5 years Rectifier Technologies saw its revenue grow at 18% per year. Even measured against other revenue-focussed companies, that's a good result. Fortunately, the market has not missed this, and has pushed the share price up by 33% per year in that time. It's never too late to start following a top notch stock like Rectifier Technologies, since some long term winners go on winning for decades. On the face of it, this looks lke a good opportunity, although we note sentiment seems very positive already.

The graphic below depicts how earnings and revenue have changed over time (unveil the exact values by clicking on the image).

earnings-and-revenue-growth
earnings-and-revenue-growth

We like that insiders have been buying shares in the last twelve months. Even so, future earnings will be far more important to whether current shareholders make money. It might be well worthwhile taking a look at our free report on Rectifier Technologies' earnings, revenue and cash flow.

What about the Total Shareholder Return (TSR)?

We'd be remiss not to mention the difference between Rectifier Technologies' total shareholder return (TSR) and its share price return. The TSR attempts to capture the value of dividends (as if they were reinvested) as well as any spin-offs or discounted capital raisings offered to shareholders. Dividends have been really beneficial for Rectifier Technologies shareholders, and that cash payout contributed to why its TSR of 324%, over the last 5 years, is better than the share price return.

A Different Perspective

It's nice to see that Rectifier Technologies shareholders have received a total shareholder return of 112% over the last year. Since the one-year TSR is better than the five-year TSR (the latter coming in at 34% per year), it would seem that the stock's performance has improved in recent times. Given the share price momentum remains strong, it might be worth taking a closer look at the stock, lest you miss an opportunity. 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. Consider for instance, the ever-present spectre of investment risk. We've identified 4 warning signs with Rectifier Technologies , and understanding them should be part of your investment process.

Rectifier Technologies is not the only stock insiders are buying. So take a peek at this free list of growing companies with insider buying.

Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on AU exchanges.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

Our goal is to create a safe and engaging place for users to connect over interests and passions. In order to improve our community experience, we are temporarily suspending article commenting