Passive investing in index funds can generate returns that roughly match the overall market. But investors can boost returns by picking market-beating companies to own shares in. For example, the Nordic American Tankers Limited (NYSE:NAT) share price is up 95% in the last 1 year, clearly besting the market decline of around 12% (not including dividends). So that should have shareholders smiling. Unfortunately the longer term returns are not so good, with the stock falling 26% in the last three years.
So let's investigate and see if the longer term performance of the company has been in line with the underlying business' progress.
Nordic American Tankers isn't currently profitable, so most analysts would look to revenue growth to get an idea of how fast the underlying business is growing. 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.
Nordic American Tankers grew its revenue by 34% last year. We respect that sort of growth, no doubt. While the share price performed well, gaining 95% over twelve months, you could argue the revenue growth warranted it. If revenue stays on trend, there may be plenty more share price gains to come. But before deciding this growth stock is underappreciated, you might want to check out profitability trends (and cash flow)
You can see below how earnings and revenue have changed over time (discover the exact values by clicking on the image).
We consider it positive that insiders have made significant purchases in the last year. Having said that, most people consider earnings and revenue growth trends to be a more meaningful guide to the business. If you are thinking of buying or selling Nordic American Tankers stock, you should check out this free report showing analyst profit forecasts.
What About Dividends?
It is important to consider the total shareholder return, as well as the share price return, for any given stock. 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. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. We note that for Nordic American Tankers the TSR over the last 1 year was 103%, which is better than the share price return mentioned above. This is largely a result of its dividend payments!
A Different Perspective
It's good to see that Nordic American Tankers has rewarded shareholders with a total shareholder return of 103% in the last twelve months. Of course, that includes the dividend. That's better than the annualised return of 10% over half a decade, implying that the company is doing better recently. Given the share price momentum remains strong, it might be worth taking a closer look at the stock, lest you miss an opportunity. It's always interesting to track share price performance over the longer term. But to understand Nordic American Tankers better, we need to consider many other factors. Even so, be aware that Nordic American Tankers is showing 3 warning signs in our investment analysis , and 2 of those don't sit too well with us...
If you like to buy stocks alongside management, then you might just love this free list of companies. (Hint: insiders have been buying them).
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on US 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.
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