While not a mind-blowing move, it is good to see that the Culp, Inc. (NYSE:CULP) share price has gained 11% in the last three months. But that doesn’t change the fact that the returns over the last half decade have been disappointing. In fact, the share price has declined rather badly, down some 61% in that time. So we’re hesitant to put much weight behind the short term increase. Of course, this could be the start of a turnaround.
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.
View our latest analysis for Culp
Because Culp 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 desire strong revenue growth. That’s because it’s hard to be confident a company will be sustainable if revenue growth is negligible, and it never makes a profit.
Over half a decade Culp reduced its trailing twelve month revenue by 4.0% for each year. That’s not what investors generally want to see. With neither profit nor revenue growth, the loss of 10% per year doesn’t really surprise us. We don’t think anyone is rushing to buy this stock. Not that many investors like to invest in companies that are losing money and not growing revenue.
The graphic below depicts how earnings and revenue have changed over time (unveil the exact values by clicking on the image).
It’s good to see that there was some significant insider buying in the last three months. That’s a positive. On the other hand, we think the revenue and earnings trends are much more meaningful measures of the business. So we recommend checking out this free report showing consensus forecasts
What About The Total Shareholder Return (TSR)?
We’d be remiss not to mention the difference between Culp’s total shareholder return (TSR) and its share price return. 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. Dividends have been really beneficial for Culp shareholders, and that cash payout explains why its total shareholder loss of 57%, over the last 5 years, isn’t as bad as the share price return.
A Different Perspective
Culp shareholders gained a total return of 5.0% during the year. Unfortunately this falls short of the market return. But at least that’s still a gain! Over five years the TSR has been a reduction of 9% per year, over five years. It could well be that the business is stabilizing. I find it very interesting to look at share price over the long term as a proxy for business performance. But to truly gain insight, we need to consider other information, too. For example, we’ve discovered 1 warning sign for Culp that you should be aware of before investing here.
There are plenty of other companies that have insiders buying up shares. You probably do not want to miss this free list of undervalued small cap 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 American 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.
