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By buying an index fund, you can roughly match the market return with ease. But many of us dare to dream of bigger returns, and build a portfolio ourselves. For example, the LRAD Corporation (NASDAQ:LRAD) share price is up 67% in the last three years, clearly besting than the market return of around 41% (not including dividends). On the other hand, the returns haven't been quite so good recently, with shareholders up just 29%.
LRAD isn't a profitable company, so 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. When a company doesn't make profits, we'd generally expect to see good revenue growth. That's because fast revenue growth can be easily extrapolated to forecast profits, often of considerable size.
In the last 3 years LRAD saw its revenue grow at 26% per year. That's much better than most loss-making companies. The share price rise of 19% per year throughout that time is nice to see, and given the revenue growth, that gain seems somewhat justified. If that's the case, now might be the time to take a close look at LRAD. If the company is trending towards profitability then it could be very interesting.
The chart below shows how revenue and earnings have changed with time, (if you click on the chart you can see the actual values).
This free interactive report on LRAD'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 LRAD'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 LRAD's TSR of 68% over the last 3 years is better than the share price return.
A Different Perspective
It's good to see that LRAD has rewarded shareholders with a total shareholder return of 29% in the last twelve months. That gain is better than the annual TSR over five years, which is 11%. Therefore it seems like sentiment around the company has been positive lately. Given the share price momentum remains strong, it might be worth taking a closer look at the stock, lest you miss an opportunity. You could get a better understanding of LRAD's growth by checking out this more detailed historical graph of earnings, revenue and cash flow.
We will like LRAD 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 US exchanges.
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.
If you spot an error that warrants correction, please contact the editor at firstname.lastname@example.org. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned. Thank you for reading.