Yahoo Finance The past five years for Magellan Aerospace (TSE:MAL) investors has not been profitable
For many, the main point of investing is to generate higher returns than the overall market. But even the best stock picker will only win with some selections. At this point some shareholders may be questioning their investment in Magellan Aerospace Corporation (TSE:MAL), since the last five years saw the share price fall 52%. On the other hand the share price has bounced 5.1% over the last week.
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.
See our latest analysis for Magellan Aerospace
In his essay The Superinvestors of Graham-and-Doddsville Warren Buffett described how share prices do not always rationally reflect the value of a business. One imperfect but simple way to consider how the market perception of a company has shifted is to compare the change in the earnings per share (EPS) with the share price movement.
Magellan Aerospace became profitable within the last five years. Most would consider that to be a good thing, so it's counter-intuitive to see the share price declining. Other metrics may better explain the share price move.
We don't think that the 1.2% is big factor in the share price, since it's quite small, as dividends go. It could be that the revenue decline of 4.3% per year is viewed as evidence that Magellan Aerospace is shrinking. This has probably encouraged some shareholders to sell down the stock.
The company's revenue and earnings (over time) are depicted in the image below (click to see the exact numbers).
It's probably worth noting that the CEO is paid less than the median at similar sized companies. But while CEO remuneration is always worth checking, the really important question is whether the company can grow earnings going forward. If you are thinking of buying or selling Magellan Aerospace stock, you should check out this free report showing analyst profit forecasts.
What About Dividends?
When looking at investment returns, it is important to consider the difference between total shareholder return (TSR) and share price return. 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. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. We note that for Magellan Aerospace the TSR over the last 5 years was -43%, which is better than the share price return mentioned above. This is largely a result of its dividend payments!
A Different Perspective
Magellan Aerospace shareholders gained a total return of 10% during the year. But that was short of the market average. On the bright side, that's still a gain, and it is certainly better than the yearly loss of about 7% endured over half a decade. It could well be that the business is stabilizing. Is Magellan Aerospace cheap compared to other companies? These 3 valuation measures might help you decide.
If you are like me, then you will not want to miss this free list of undervalued small caps that insiders are buying.
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.
