The simplest way to invest in stocks is to buy exchange traded funds. But if you pick the right individual stocks, you could make more than that. For example, the Virco Mfg. Corporation (NASDAQ:VIRC) share price is up 72% in the last 1 year, clearly besting the market return of around 33% (not including dividends). So that should have shareholders smiling. Unfortunately the longer term returns are not so good, with the stock falling 9.5% in the last three years.
So let’s assess the underlying fundamentals over the last 1 year and see if they’ve moved in lock-step with shareholder returns.
Virco Mfg isn’t currently profitable, so most analysts would look to revenue growth to get an idea of how fast the underlying business is growing. When a company doesn’t make profits, we’d generally expect to see good revenue growth. Some companies are willing to postpone profitability to grow revenue faster, but in that case one does expect good top-line growth.
Virco Mfg actually shrunk its revenue over the last year, with a reduction of 11%. The stock is up 72% in that time, a fine performance given the revenue drop. To us that means that there isn’t a lot of correlation between the past revenue performance and the share price, but a closer look at analyst forecasts and the bottom line may well explain a lot.
The image below shows how earnings and revenue have tracked over time (if you click on the image you can see greater detail).
NasdaqGM:VIRC Earnings and Revenue Growth September 14th 2021
It’s probably worth noting that the CEO is paid less than the median at similar sized companies. It’s always worth keeping an eye on CEO pay, but a more important question is whether the company will grow earnings throughout the years. If you are thinking of buying or selling Virco Mfg stock, you should check out this free report showing analyst profit forecasts.
A Different Perspective
It’s nice to see that Virco Mfg shareholders have received a total shareholder return of 72% over the last year. There’s no doubt those recent returns are much better than the TSR loss of 3% per year over five years. The long term loss makes us cautious, but the short term TSR gain certainly hints at a brighter future. 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. To that end, you should learn about the 2 warning signs we’ve spotted with Virco Mfg (including 1 which is a bit unpleasant) .
Of course Virco Mfg may not be the best stock to buy. So you may wish to see this free collection of growth stocks.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on US exchanges.
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.
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