Yahoo Finance Alcon's (VTX:ALC) investors will be pleased with their 22% return over the last three years
By buying an index fund, investors can approximate the average market return. But if you buy good businesses at attractive prices, your portfolio returns could exceed the average market return. For example, the Alcon Inc. (VTX:ALC) share price is up 21% in the last three years, clearly besting the market return of around 14% (not including dividends). However, more recent returns haven't been as impressive as that, with the stock returning just 1.8% in the last year , including dividends .
With that in mind, it's worth seeing if the company's underlying fundamentals have been the driver of long term performance, or if there are some discrepancies.
See our latest analysis for Alcon
While Alcon made a small profit, in the last year, we think that the market is probably more focussed on the top line growth at the moment. 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.
Alcon's revenue trended up 9.6% each year over three years. That's pretty nice growth. While the share price has done well, compounding at 7% yearly, over three years, that move doesn't seem over the top. Of course, valuation is quite sensitive to the rate of growth. Of course, it's always worth considering funding risks when a company isn't profitable.
You can see how earnings and revenue have changed over time in the image below (click on the chart to see the exact values).
Alcon is a well known stock, with plenty of analyst coverage, suggesting some visibility into future growth. You can see what analysts are predicting for Alcon in this interactive graph of future profit estimates.
A Different Perspective
Alcon shareholders have gained 1.8% over twelve months (even including dividends). This isn't far from the market return of 1.9%. Notably, the longer term shareholders are better off with their TSR of 7% per year over the last three years. Share price gains are anything but steady, so it's a positive to see that the longer term returns are reasonable. 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 be aware of the 1 warning sign we've spotted with Alcon .
If you are like me, then you will not want to miss this free list of growing companies 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 Swiss 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.
Join A Paid User Research Session
You’ll receive a US$30 Amazon Gift card for 1 hour of your time while helping us build better investing tools for the individual investors like yourself. Sign up here
