Yahoo Finance Investors in RF Capital Group (TSE:RCG) from five years ago are still down 49%, even after 13% gain this past week
It is doubtless a positive to see that the RF Capital Group Inc. (TSE:RCG) share price has gained some 53% in the last three months. But that doesn't change the fact that the returns over the last five years have been less than pleasing. You would have done a lot better buying an index fund, since the stock has dropped 59% in that half decade.
While the stock has risen 13% in the past week but long term shareholders are still in the red, let's see what the fundamentals can tell us.
Check out our latest analysis for RF Capital Group
RF Capital Group 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. Generally speaking, companies without profits are expected to grow revenue every year, and at a good clip. Some companies are willing to postpone profitability to grow revenue faster, but in that case one does expect good top-line growth.
In the last half decade, RF Capital Group saw its revenue increase by 51% per year. That's well above most other pre-profit companies. In contrast, the share price is has averaged a loss of 10% per year - that's quite disappointing. It's safe to say investor expectations are more grounded now. If you think the company can keep up its revenue growth, you'd have to consider the possibility that there's an opportunity here.
You can see how earnings and revenue have changed over time in the image below (click on the chart to see the exact values).
This free interactive report on RF Capital Group's balance sheet strength is a great place to start, if you want to investigate the stock further.
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 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. Its history of dividend payouts mean that RF Capital Group's TSR, which was a 49% drop over the last 5 years, was not as bad as the share price return.
A Different Perspective
Investors in RF Capital Group had a tough year, with a total loss of 35%, against a market gain of about 5.4%. 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. Regrettably, last year's performance caps off a bad run, with the shareholders facing a total loss of 8% per year over five years. 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. 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. Like risks, for instance. Every company has them, and we've spotted 3 warning signs for RF Capital Group (of which 2 are concerning!) you should know about.
If you would prefer to check out another company -- one with potentially superior financials -- then do not miss this free list of companies that have proven they can grow earnings.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on Canadian exchanges.
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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.
