Yahoo Finance Investors in Mount Gibson Iron (ASX:MGX) have unfortunately lost 32% over the last year
It's easy to match the overall market return by buying an index fund. But if you buy individual stocks, you can do both better or worse than that. That downside risk was realized by Mount Gibson Iron Limited (ASX:MGX) shareholders over the last year, as the share price declined 32%. That's disappointing when you consider the market declined 0.3%. However, the longer term returns haven't been so bad, with the stock down 21% in the last three years. Furthermore, it's down 24% in about a quarter. That's not much fun for holders.
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.
View our latest analysis for Mount Gibson Iron
Because Mount Gibson Iron made a loss in the last twelve months, we think the market is probably more focussed on revenue and revenue growth, at least for now. Shareholders of unprofitable companies usually expect strong revenue growth. That's because fast revenue growth can be easily extrapolated to forecast profits, often of considerable size.
In the last year Mount Gibson Iron saw its revenue grow by 170%. That's a strong result which is better than most other loss making companies. Given the revenue growth, the share price drop of 32% seems quite harsh. Our sympathies to shareholders who are now underwater. On the bright side, if this company is moving profits in the right direction, top-line growth like that could be an opportunity. Our brains have evolved to think in linear fashion, so there's value in learning to recognize exponential growth. We are, in some ways, simply the wisest of the monkeys.
You can see how earnings and revenue have changed over time in the image below (click on the chart to see the exact values).
Take a more thorough look at Mount Gibson Iron's financial health with this free report on its balance sheet.
A Different Perspective
Investors in Mount Gibson Iron had a tough year, with a total loss of 32%, against a market gain of about 0.3%. 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. Longer term investors wouldn't be so upset, since they would have made 6%, each year, over five years. If the fundamental data continues to indicate long term sustainable growth, the current sell-off could be an opportunity worth considering. It's always interesting to track share price performance over the longer term. But to understand Mount Gibson Iron better, we need to consider many other factors. Even so, be aware that Mount Gibson Iron is showing 2 warning signs in our investment analysis , and 1 of those shouldn't be ignored...
We will like Mount Gibson Iron better if we see some big insider buys. While we wait, check out this free list of growing companies with considerable, recent, insider buying.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on Australian 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.
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